Cosmos Health Inc 10-K for FY2022
Cosmos Health Inc. (COSM)
About this 10-K
Cosmos Health Inc filed this 10-K on April 12, 2023, covering the fiscal year ended December 31, 2022 (FY2022).
Headline figures
Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $50.35M
- down 10.5% from $56.24M a year earlier
- Net loss
- $13.83M
- compared with a net loss of $7.96M a year earlier
- Diluted EPS
- -$33.16
- compared with -$23.74 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the fiscal year ended
For the transition period from __________ to __________
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Securities registered under Section 12(b) of the Exchange Act:
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
Statements contained or incorporated by reference in this document contain information that includes or is based on “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, of the Exchange Act. These statements, including estimates of future revenues, future expenses, future net income and future net income per share, contained in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in this document, are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed results of operations. We have tried, whenever possible, to identify such statements by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plan,” “projected,” “forecast,” “will,” “may” or similar expressions.
We have based these forward-looking statements on our current expectations and projections about the growth of our business, our financial performance and the development of our industry. Because these statements reflect our current views concerning future events, these forward-looking statements involve risks and uncertainties. Investors should note that many factors, could affect our future financial results and could cause our actual results to differ materially from those expressed in forward-looking statements contained or incorporated by reference in this document.
We do not undertake any obligation to update our forward-looking statements after the date of this document for any reason, even if new information becomes available or other events occur in the future, except as may be required under applicable securities law. You are advised to consult any further disclosures we make on related subjects in our reports filed with the Securities and Exchange Commission (SEC).
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PART I
Item 1. Business
Company Overview
Cosmos Health Inc. together with its subsidiaries (hereinafter referred to collectively as “us”, “we”, or the “Company”) is an international healthcare group with a proprietary line of nutraceuticals and distributor of branded and generic pharmaceuticals, nutraceuticals, over-the-counter (“OTC”) medications and medical devices through an extensive, established EU and UK distribution network. The Company identifies, acquires, develops and commercializes products that improve patients’ lives and outcomes. We have developed a global distribution platform which is currently expanding throughout Europe, Asia and North America. Currently, the Company has offices and distribution centers through its the parent and its wholly owned subsidiaries: (i) Cosmos Health Inc., the parent company headquartered in Chicago, USA; (ii) SkyPharm S.A., headquartered in Thessaloniki, Greece; (iii) Decahedron Ltd., headquartered in Harlow, United Kingdom; and (iv) Cosmofarm S.A., headquartered in Athens, Greece.
The Company’s cross-border pharmaceutical business serves wholesale pharmaceutical distributors and independent retail pharmacies across the EU through a network of two strategic distribution centers, one in Greece and one in the UK, as well as an additional warehousing facility. The Company focuses on leveraging its growing purchasing scale and supplier relationships to secure discounts and provide pharmaceuticals at reduced prices and on continuing to drive organic growth at attractive margins for its cross-border pharmaceutical wholesale business.
The Company operates in the business of full-line pharmaceutical wholesale distribution and serves approximately 1,500 independent retail pharmacies and 40 pharmaceutical wholesalers in Greece region by providing brand-name and generic pharmaceuticals, over-the-counter medicines, vitamins and nutraceuticals. We invest in technology to enhance safety, distribution and warehousing efficiency and reliability. Specifically, the Company operates a fully automated warehouse system with three robotic systems, two ROWA™ types and one A-frame type, that ensure near-zero error selection rate, accelerate order fulfillment, and yield higher cost-efficiency in our distribution center.
The Company regularly evaluates and undertakes strategic initiatives to expand its distribution reach, improve its profit margins, and strengthen its competitive position. Taking into consideration the growing demand of various vitamins and nutraceuticals, the Company entered the market with its own brand of nutraceuticals: Sky Premium Life® (SPL). Our current business has provided us with access to wholesalers both from the sourcing and the sales division of our wholesale business. We sell our products to vendors that supply us with pharmaceutical products as well as to our clients to whom we currently sell pharmaceutical products. We serve this demand by offering quality products to our existing network of wholesalers and pharmacies. Pharmacies are still the key channels for distribution and sales of nutraceuticals in the European market. The development and manufacturing of our own line is assigned to a related party which operates according to our specifications and GMP protocols.
We make use of analytics and customer feedback from our EU-wide network of wholesale pharmaceutical distributors and independent retail pharmacies to identify and evaluate which nutraceutical product codes of the brand Sky Premium Life® to be developed, commercialized and added to our portfolio. We intend to continue to bring Sky Premium Life® products to market primarily through our existing network of over 160 pharmaceutical wholesale clients and vendors and approximately 100 independent retail pharmacies within the EU market. Moreover, we have penetrated several markets through digital sale channels. There is growing demand for vitamins and nutraceuticals and we are committed to developing quality products and creating enhanced customer value.
We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of pharmaceutical products that we currently distribute. We believe that the demand for reasonably priced medicines, delivered on time and in the highest quality is set to increase in the years to come, as the population’s life expectancy increases. With our product portfolio of patented and non-patented medicines, we contribute to the optimization of efficient medicinal care, and thereby lowering cost for health insurance funds, companies, and patients. We also believe that the demand for non-prescription wellness products such as food and dietary supplements will continue to increase as individuals are increasingly supplementing their nutritional intake.
We believe the EU pharmaceutical import/export market will continue to grow in conjunction with the demand for nutritional products. We continue to encounter competition in the market as we grow. The competition comes in the form of level of service, reliability, and product quality. On the procurement side we continue to expand our vendor base. In order to minimize business risks, we diversify our sources of supply. We maintain our high-quality standards by carefully selecting and qualifying our suppliers as well as actively ensuring that our suppliers meet our standard of quality control on an ongoing basis.
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Business Environment
The Company conducts its business within the pharmaceutical and the healthcare industry and is active in branded pharmaceuticals, generics and nutraceutical product markets. The pharmaceutical industry is highly competitive and is subject to comprehensive government regulations. Many factors may significantly affect the Company’s sales of its products, including, but not limited to, efficacy, safety, price and cost-effectiveness, marketing effectiveness, product labeling, quality control and quality assurance. Currently, most of the products that the Company is trading, compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future.
Generic medicines are the pharmaceutical and therapeutic equivalents of branded pharmaceutical products and are generally marketed under their generic (chemical) names rather than by brand names. Typically, a generic drug may not be marketed until the expiration of applicable patent(s) on the corresponding branded product, unless a resolution of patent litigation results in an earlier opportunity to enter the market. Generic drugs are the same as branded products in dosage form, safety, efficacy, route of administration, quality, performance characteristics and intended use, but they are sold generally at prices below those of the corresponding branded products. Generic drugs provide a cost-effective alternative for consumers, while maintaining the same high quality, efficacy, safety profile, purity and stability of the branded product.
The Company also conducts its business within the global nutraceuticals market with our own brand which we consider to be highly qualitative and competitive. Nutraceuticals are defined as products that contain at least one dietary ingredient within them and can be consumed orally. Some of the purposes of nutraceuticals are used for immune system defense, energy, stress, bones and joints, The global nutraceutical market has shown rise for demand and growth within the last several years. The global market is driven by the rising popularity of sports-based performance enhancement supplements and the focus on preventive healthcare measures. The COVID-19 pandemic has also driven the global market to a high demand for immunity boosting nutraceutical products.
Corporate Strategy
Our main strategy initiative is focused on continuing our progress in becoming a global pharmaceutical wholesale and import/export company through the development of a lean and efficient operating model, as well as, to expand our portfolio of our own branded nutraceutical products, grow our customer base and achieve our growth stabilization in this new market and gain an adequate size in the global nutraceuticals market. We are committed to serving our customers while continuing to innovate and provide products that make a difference in the lives of individuals. We strive to maximize our shareholders’ value by adapting to market realities and customer needs. Our strategy involves building a multinational network or wholesalers, distributors, and pharmacies and simultaneously continuing to expand the portfolio of products that we distribute to that network.
We are committed to driving organic growth at attractive margins by improving execution, optimizing cash flow and leveraging our strong market position, while maintaining a streamlined cost structure throughout each of our businesses. We continue to further align our organization to our customers’ needs in a more seamless and unified way, while supporting corporate strategy and accelerating growth. Implementing this disciplined, focused strategy has allowed us to significantly expand our business, and we believe we are well-positioned to grow revenue and increase operating income through the execution of the following key elements of our business:
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| Branded Pharmaceuticals: Branded pharmaceutical products are the primary product category that we import and export. We constantly evaluate product availability, pricing, demand trends, and patent expirations to maximize our performance. As the patents for branded products near expiration, the generic equivalents enter the market place and the demand for those branded products start to decrease. We monitor these cycles closely and always look to find value in pricing fluctuations caused by the patent expirations as the generic equivalents enter the market. |
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| Generic Pharmaceuticals: Generic pharmaceutical products are the secondary product category that we import and export. We apply the same discipline to generics that we do to the branded. We evaluate the demand and supply dynamics of branded products as their patents expire. This insight sheds light on the demand of generic products that take their place. Understanding the historical and market specific characteristics of generic product demand provides insight that we use to give guidance to our vendors that source our generic drug exports. |
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| Health Products & Food Supplements: The wholesale distribution of food supplements offer greater margins than pharmaceutical product distribution. We are always looking to expand the portfolio of products that we distribute to maximize our margins. We offer convenience to our customers by providing them a larger portfolio of products that they can source from a single vendor. In addition to being wholesalers for supplements and related products we are also creating our own brand of products to sell to our current customer base. Our wholesale business gives insight to what products are in demand and we communicate with our customer base to identify which products to develop. Our own brand of products carries significantly higher margins than simply serving as a wholesaler for other brands. | |
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| Research & Development: We are committed to strategic R&D across each business unit with a particular focus for nutraceutical products with inherently lower risk profiles and clearly defined regulatory pathways. We are constantly evaluating the demand of food supplements in the markets that we currently distribute pharmaceutical products to. This research and analysis determines which food and nutritional supplements we choose to develop as well as their formulations. This approach maximizes the probability of successfully competing with other brands in the marketplace. | |
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| Research & Development: We are committed to strategic R&D across each business unit with a particular focus for nutraceuticals with inherently lower risk profiles and clearly defined regulatory pathways. We are constantly evaluating the demand for nutraceuticals in the markets that we currently distribute pharmaceutical products to. This research and analysis determine which nutritional supplements we choose to develop as well as their formulations. This approach maximizes the probability of successfully competing with other brands in the marketplace. | |
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| Acquisitions: We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of the products that we currently distribute. In addition to focusing on organic growth drivers, we are also actively pursuing accretive acquisitions that offer long-term revenue growth, margin expansion through synergies, and the ability to maintain a flexible capital structure. | |
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| Local & Direct to Pharmacy Wholesale: We are expanding into the full-line wholesale distribution business through acquisition. Full-line pharmaceutical wholesalers provide the local markets with branded pharmaceuticals, generic pharmaceuticals, over-the-counter (OTC) medicines, vitamins and food supplements. By expanding our pharmaceutical distribution business, we will have a better ability to source more branded and generic products directly from manufacturers and sell our vitamins, food supplements and cosmetic products directly to pharmacies for better prices. We expect this expansion to increase our sales and profit margins as we vertically integrate into the supply chain. |
To successfully execute our corporate strategy, we believe that the Company must adopt, incorporate and maintain the aforementioned core strengths, although no assurances can be made that the Company will be able to effectively implement these strategies.
Products & Services
Products
The current principal activity of the Company is the creation, development and trading of its own proprietary branded nutraceutical product lines “Sky Premium Life®” (“SPL”) and Mediterranation®. The Company’s portfolio currently includes 82 product codes including vitamins, minerals and other herbal extracts used for health prevention and care needs. Our plan for our own branded nutraceuticals is to enlarge our portfolio up to 150 SKUs. We also use our subsidiaries as distribution centers for SPL in order to penetrate UK and EU markets. However, the leading activity of Decahedron is the trading of branded and generic pharmaceutical products and medicines across the UK and European Union member states. We also buy from pharmacies and other wholesale pharmaceutical companies and resell these products to other EU countries or in the UK. We purchase excess inventories at a discount from wholesalers and export pharmaceutical product codes to EU member states capturing contract price differentials in the process. The Company only purchases stock with purchase orders at hand, limiting inventory risk. EU countries have put into force new legal frameworks and mandates that boost the parallel trade market in order to deflate healthcare pricing across the region.
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Product Categories
Our product portfolio includes medicines, OTC medicines, nutraceutical products, health care products, medical devices, baby products and others. Total revenues from the product categories of our total consolidated revenues during the year ended December 31, 2022 are as follow;
Product Categories |
| Percentage of total Revenue |
Medicines |
| 74.66% |
OTC Medicines |
| 6.59% |
Vitamins, Minerals and Dietary Products |
| 9.66% |
Heath Care Products |
| 2.54% |
Medical Devices |
| 6.14% |
Baby Products |
| 0.28% |
Others |
| 0.13% |
Total |
| 100% |
Our proprietary nutraceutical line “Sky Premium Life” which has over 82 SKUs, is classified into two different main Categories, Products per Benefit and Products per Nutrient as follows:
Products per Benefit |
| Products per Nutrient |
General Wellbeing |
| Amino Acids |
Immunity |
| Botanicals, Herbs & Extracts |
Heart |
| Vitamins & Minerals |
Bones & Joints |
| Specialized Formulas & Complexes |
Men’s Health |
| Omegas & Fatty Acids |
Women’s Health |
| Specialized Nutrients |
Beauty |
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Digestion |
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Brain |
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Vision |
|
|
Energy |
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Sports |
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Mood/Stress/Sleep |
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Antioxidant Activity |
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Services
The principal activity of our services is the distribution of a full range of branded pharmaceutical products, over-the-counter products, cosmetics, nursery, and nutraceutical products to pharmacies across Greece. We utilize the latest technology in pharmaceutical storage and retrieval systems to ensure the quality and accuracy of its distribution. Our facility utilizes ROWA™ (German pharmacy robotics) technologies to automate our procurement, a German fully automated warehouse system, inventory management, and order execution. Therefore, we achieve a zero-error rate, faster order picking, automated order picking process, higher cost-efficiency. We stay in the forefront of quality assurance and accuracy by investing in the most innovative machinery and software available to pharmaceutical distributors. Our company supports all its customers with special product offerings, seasonal products, and all the top brands and trending products.
We believe that the entire aforementioned product life cycle would take approximately six weeks to two months, from the demand list to the payment for the shipment.
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Distribution and Marketing
The majority of our products are represented directly and indirectly through a dedicated sales force team. Our sales force targets mainly wholesale distributors and other healthcare providers. We sell our products principally through independent wholesale distributors, but we also sell directly to other healthcare providers such as; clinics, government agencies, independent retail and specialty pharmacies and independent specialty distributors. Customer service representatives are centralized in order to respond to customer needs in a timely and effective manner. We seek to motivate and provide incentives to our sales force team by offering high quality products and providing them with product support, training seminars, sales convention and financial incentives.
Our products in Europe and in the UK are shipped directly from our warehouse facilities and in foreign markets we have contracted third-parties to distribute our products.
We are formulating a broader and more diversified pharmaceutical product portfolio and a greater selection of targets for potential development. We target products with limited competition for reasons such as trading complexity or the market size, which make our pharmaceutical products a key growth driver of our portfolio and complementary to other product offerings.
Patents, Trademarks, Licenses and Proprietary Property
We have developed or acquired various proprietary pharmaceutical and nutraceutical products, nutraceutical products licenses, wholesale licenses, processes, software, and other intellectual property that are used either to facilitate the conduct of our business or that are made available as products or services to customers.
At present, besides the above licenses, we do not have any intellectual property or other licenses, including, but not limited to, patents, trademarks, franchises, concessions, and royalty agreements or other proprietary interests.
We have obtained trademark registrations for “Sky Premium Life®”, and related logos for all of our “Sky Premium Life®” products product lines. We hold trademark registrations in Europe.
We rely on confidentiality agreements with our employees, consultants and other parties to protect, among other things, trade secrets and other proprietary technology. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property
Product Insurance
We have insurance in place for our warehouses and the products in stock against any damage or theft, but we do not insure our products after the sale, since we are working under an Ex-works policy, and thus our clients are responsible for the transportation and the insurance of the products against any damage. In the future, we will continue to reevaluate our decision and may purchase product liability insurance to cover some of or all of our product liability risk.
Customers
Through our subsidiaries, we primarily sell pharmaceutical products directly to pharmacies and a limited number of large wholesale drug distributors who, in turn, supply-sell the products to other wholesalers, hospitals, pharmacies, and governmental agencies across the European Union member state. Total revenues from the customers that accounted for 10% or more of our total consolidated revenues during the years ended December 31, 2022 and 2021 are as follows:
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| 2022 |
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| 2021 |
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Medihelm SA |
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| 9.28 | % |
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| 15.33 | % |
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No other customer generated over 10% of our total revenue.
We have a diverse customer base that includes wholesalers and retail healthcare providers. We make a significant amount of our sales to a relatively small number of pharmaceutical wholesalers. These customers represent an essential part of the distribution chain of our products. Pharmaceutical wholesalers have undergone, and are continuing to undergo, significant consolidation in a worldwide basis. This consolidation resulted in these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing our business.
Geographic Markets
All of our revenues are generated from operations in the European Union and UK, or otherwise earned outside the U.S. All of our foreign operations are subject to risks inherent in conducting business abroad, including price and currency exchange controls, fluctuations in the relative values of currencies, political and economic instability and restrictive governmental actions. Our geographical market sales distribution of our total consolidated revenues during the years ended December 31, 2022 and 2021 are as follows:
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| 2022 |
|
| 2021 |
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Greece |
|
| 98.94 | % |
|
| 98.80 | % |
Germany |
|
| 0.00 | % |
|
| 0.02 | % |
UK |
|
| 0.80 | % |
|
| 0.82 | % |
Italy |
|
| 0.00 | % |
|
| 0.03 | % |
Denmark |
|
| 0.00 | % |
|
| 0.10 | % |
Croatia |
|
| 0.08 | % |
|
| 0.03 | % |
Cyprus |
|
| 0.18 | % |
|
| 0.20 | % |
Total |
|
| 100.00 | % |
|
| 100.00 | % |
We currently sell the products to wholesalers through our own sales force. We do not sell directly to large drug store chains or through distributors in countries where we do not have our own sales staff. As part of our sales marketing and promotion program, we use direct advertising, direct mailings, trading techniques, direct and personal contacts, exhibition of products at medical conventions and sponsor medical education symposia.
Competition
Our pharmaceutical businesses are conducted in intensely competitive and often highly regulated markets. Many of our trading of pharmaceutical products face competition in the form of branded or generic drugs that treat similar diseases or indications. The principal forms of competition include efficacy, safety, ease of use, and cost effectiveness. The means of competition vary across product categories and business groups, demonstrating that the value of our trading products is a critical factor for success in all of our principal businesses.
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Our competitors include other trading companies, and smaller companies with generic drug and consumer healthcare products. We compete with other companies that manufacture and sell products that treat diseases or indications similar to those treated by our trading pharmaceutical products.
Our competitive position in pharmaceutical sector is affected by several factors including among others, the amount and effectiveness of our and our competitors’ promotional resources, customer acceptance, product quality, our and our competitors’ introduction of new products, ingredients, claims, dosage forms, or other forms of innovation, and pricing, regulatory and legislative matters (such as product labeling, patient access and prescription).
The branded pharmaceutical industry is highly competitive. Our products compete with products manufactured by many other companies in highly competitive markets throughout the EU territory and internationally as well. Competitors include many of the major brand name and generic manufacturers of pharmaceutical products. If competitors introduce new products, delivery systems or processes with therapeutic or cost advantages, our products can be subject to progressive price reductions or decreased volume of sales, or both.
In the generic pharmaceutical market, we might face intense competition from other generic drug manufacturers, brand name pharmaceutical companies, existing brand equivalents and manufacturers of therapeutically similar drugs.
By specializing in high barrier to entry products, we endeavor to market more profitable and longer-lived products relative to commodity generic products. We believe that our competitive advantages include our integrated team-based approach to product development that combines our formulation, regulatory, legal and commercial capabilities; our ability to introduce new generic equivalents for brand-name drugs; our ability to meet customer expectations; and the breadth of our existing generic product portfolio offering.
Newly introduced generic products with limited or no other generic competition typically garner higher prices. At the expiration of the exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug. Consequently, the maintenance of profitable operations in generic pharmaceuticals depends, in part, on our ability to select, develop and launch new generic products in a timely and cost-efficient manner and to maintain efficient, high quality business capabilities.
We compete in the nutritional industry with our own branded nutraceutical products against companies that sell through retail stores, as well as against other direct selling companies. We compete against manufacturers and retailers of nutraceutical products which are distributed through supermarkets, drug stores, health food stores, vitamin outlets and mass market retailers, among others. We believe that the principal components of competition in nutraceutical products are expertise and service, high product quality, diversification and differentiation, price and brand recognition.
Operating conditions have become more challenging under the mounting global pressures of competition, industry regulation and cost containment. We continue to take measures to evaluate, adapt and improve our organization and business practices to better meet customer and public needs. We also seek to continually enhance the organizational effectiveness of all of our functions, including efforts to accurately and ethically launch and promote our products.
Information Systems
The Company operates its full-service wholesale pharmaceutical distribution facilities in Europe on one primary enterprise resource planning (“ERP”) system that provides for, among other things, electronic order entry by customers, invoice preparation and purchasing, and inventory tracking. We are currently making significant investments to enhance and upgrade the ERP system.
Additionally, we are improving our entity-wide infrastructure environment to drive efficiency, capabilities, and speed to market. We will continue to invest in advanced information systems and automated warehouse technology. For example, in an effort to comply with future pedigree and other supply chain custody requirements we have made significant investments in our secure supply chain information systems.
The Company processes a substantial portion of its purchase orders, invoices, and payments electronically. However, it continues to make substantial investments to expand its electronic interface with its suppliers. The Company has integrated warehouse operating system, which are used to manage the majority of transactional volume. The warehouse operating system has improved the distribution services productivity and operating leverage.
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Government Regulations
Government authorities in the EU and in other countries extensively regulate, among other things, the research, development, testing, approval, manufacturing, labeling, post-approval monitoring and reporting, packaging, advertising and promotion, storage, distribution, marketing and export and import of pharmaceutical products. As such, our branded pharmaceutical products and the generic product candidates are subject to extensive regulation both before and after approval. The process of obtaining regulatory approvals and the subsequent compliance with applicable state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with these regulations could result in, among other things, warning letters, civil penalties, delays in approving or refusal to approve a pharmaceutical product.
Our business is mainly the trading of branded and generic pharmaceutical products and medicines within the EU member states. In order to be able to operate our business, we need to comply with EU regulations, as well as EU member states regulations that govern various operations of our business. The government regulation that applies to our business is the granting to our companies, SkyPharm and Decahedron, of the Authorization for Wholesale Distribution of Medicinal Products for human use. In order for this Authorization to be granted the companies need to always comply with certain Good Distribution Practices (“GDP”) that mainly assure the proper storage, handling, distribution and trade of the pharmaceutical products.
As of July 22, 2015, the Hellenic Ministry of Health and more specifically the National Organization for Medicines granted to SkyPharm a license for the wholesale of pharmaceutical products for human use. The license is valid for a period of five years and pursuant to the EU directive of (2013/C343/02). SkyPharm is subject to the Guidelines of the Good Distribution Practices of the European Union (the “Good Distribution Practices”) for the sale and distribution of medical products for human use. The Company submitted its application for renewal one month before the license expiration to the Hellenic Republic National Organization, but according to the EMA (eudragmdp.ema.europa.eu/inspections/view/wda/WDAHomePage.xhtml): “Due to the restrictions caused by COVID-19, the period of validity of MIA’s, WDA’s, GMP and GDP certificates is automatically extended until the end of 2021. On-site inspections will resume as soon as there is a consensus that the period of the public health crisis has passed. The clarifying remark section of individual MIA’s, WDA’s, GMP and GDP certificates will indicate any exceptions. Competent authorities reserve the right to inspect a manufacturing site should the need arise.” The Company is now focused on its own proprietary nutraceuticals line SPL and therefore is not subject to the Guidelines of the Good Distribution Practice of Medicinal Products for Human Use. The Company has not submitted any renewal of the license and any potential needs for such services can be provided by the other subsidiaries which are subject to the Guidelines of the Good Distribution Practice of Medicinal Products for Human Use and their licenses are valid.
Decahedron received its Wholesale Distribution Authorization for human use on February 5, 2021, from the UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) in accordance with Regulation 18 of the Human Medicines Regulations 2012 (SI 2012/1916) and it is subject to the provisions of those Regulations and the Medicines Act 1971. This License will continue to remain in force from the date of issue by the Licensing Authority unless cancelled, suspended, revoked or varied as to the period of its validity or relinquished by the authorization holder.
Cosmofarm received its Wholesale Distribution Authorization for human use on February 15, 2019, from the National Organization for Medicines. The license is valid for a period of five years and pursuant to the EU directive of (2013/C343/01). Also, Cosmofarm was granted with GDP certificate on November 11, 2019.
Our subsidiaries are ISO 9001 certified for a management system for the trade and distribution of pharmaceuticals. As part of the certification process by the International Organization for Standardization, we need to be compliant with the General Data Protection Regulation (“GDPR”) adopted by the European Union in May 2018. GDPR applies to the processing of personal data of persons in the EU by a controller or processor.
Research and Development Expenditures
The Company entered into a Research & Development agreement with Doc Pharma S.A. on May 17, 2021. Under this agreement, Doc Pharma will be responsible for the research, development, design, registration, copy rights and licenses of 250 nutritional supplements for the final products called Sky Premium Life®.
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Distribution & Trade Agreements
On July 1, 2021, the Company’s subsidiary, SkyPharm SA, entered into an exclusive distribution agreement with a company based in Germany, henceforward referred to as “Distributor A”, whereas SkyPharm appointed Distributor A to be the responsible Partner for the distribution, promotion, trade marketing, logistics and sale of the nutraceuticals manufactured and supplied by SkyPharm (Sky Premium Life®), in the territories of Austria & Germany. Distributor A places purchase orders with SkyPharm at the company’s address and the purchase order is necessary to initiate any shipment.
On July 7, 2021, SkyPharm SA signed a trade agreement with a company specializing in e-commerce mall advice and operation, henceforward referred as “Distributor B”. Based on the agreement, SkyPharm will sell its own branded products Sky Premium Life ® to final consumers through the e-commerce store opened by Distributor B on Tmall International MALL and Distributor B will provide platform operation services to SkyPharm. The services provided by Distributor B will include mall construction, mall operation and network promotion, along with collection, settlement, customer service, logistics and distribution.
On November 25, 2021, SkyPharm SA signed a trade agreement with a wholesaler which operates in the storage, distribution, trading & promotion of pharmaceutical products) henceforward referred as “Distributor C”. Based on the agreement Distributor C is appointed as the exclusive representative for the promotion & distribution of our proprietary nutraceutical products Sky Premium Life®, in Greece.
During July 2021, the Company’s subsidiary, Decahedron Ltd, created a distribution page on Amazon UK, through which it sells, advertises and promotes our own proprietary branded nutraceutical product line “Sky Premium Life®, directly to final consumers.
On September 22, 2022, Cosmos Health Inc. entered into a distribution agreement with a third party in order to become the distributor of Monkeypox Virus Real-Time PCR Detection Kits. Cosmos will have exclusive distribution rights for Greece and Cyprus, with the opportunity to distribute the test kits across Europe on a non-exclusive basis.
International Cannabis Corp. (f/k/a Kaneh Bosm Biotechnology Inc.) - Cannabis
Distribution and Equity Agreement
On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of Cannabis, cannabidiol (“CBD”) and/or any Cannabis Extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.
The Distribution and Equity Acquisition Agreement was to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined therein) product pricing and Marathon has not become profitable within five (5) years of the agreement. The transaction closed on May 22, 2018 after the due diligence period, following which the Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company was entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. The Company was also given the right to nominate one director to the Marathon board of directors.
On March 20, 2023, the Company’s Legal counsel provided notice to Marathon Global Inc, that Cosmos terminated the Equity agreement dated on March 19, 2018 pursuant to Section 3.2 and that termination is effective thirty days from the date of the letter.
Share Exchange Agreements
On May 17, 2018, the Company entered into a Share Exchange Agreement with Marathon, Kaneh Bosm Biotechnology Inc. (n/k/a International Cannabis Corp. (OTC: KNHBF)) and certain other sellers of Marathon capital stock. Under the Share Exchange Agreement, the Company agreed to transfer 2.5 million shares in Marathon to KBB, a Company incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for 5 million shares of KBB. On July 16, 2018, the Company completed a new Share Exchange Agreement (the “New SEA”) by and among Marathon, KBB, and certain other sellers of Marathon capital stock. Pursuant to the terms of the New SEA, the Company transferred its remaining one-half interest (2.5 million shares) in Marathon to KBB. The Company received an additional five million shares of KBB. Completion of the New SEA by the Company was subject to satisfaction of various conditions precedent all of which were satisfied. The ten million shares of KBB owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over KBB.
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Employees & Human Capital
As of December 31, 2022, we had 102 full-time employees in total, of which 16 engaged in sales department, 4 in procurement department, 2 in marketing department, 21 in warehouse services, 20 in logistics/transportation works, 3 in quality assurance, 8 in finance & accounting department, 4 in management, 3 in cleaning, 5 in administration, 10 in call center, 4 in B2B e-shop and 2 in IT department. Our employees are not members of any unions. We consider our relations with our employees to be good and have not experienced any work stoppages, slowdowns or other serious labor problems that have materially impeded our business operations.
We have a team with a significant track record in the pharmaceutical business. In order to achieve our strategic objectives, we have, and will remain, focused on hiring and retaining a highly skilled management team that has extensive experience and specific skill sets relating to the sales, selection, development and commercialization of pharmaceutical products. We intend to continue our efforts to build and expand this team as we grow our business. No assurances can be given that the Company will be able to retain any additional persons.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.
Attracting and retaining top talent is an integral part to our success. We intentionally build a workforce of people with viewpoints and backgrounds as diverse as the customers we serve around Europe. As a responsibility to our team and in an evolving effort, we provide employees with meaningful careers and development opportunities to grow and succeed. We employed 102 individuals as of December 31, 2022. Our global workforce is comprised of the following ethnicities: 99.0 percent Caucasian and 1.0 percent Asian. Of those employees, 38.0 percent are female.
Available Information
Our internet address is http://www.cosmoshold.com. We post links on our website to the following filings as soon as reasonably practicable after they are electronically filed or furnished to the SEC: annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendment to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. All such filings are available through our website free of charge. The information on our Internet website is not incorporated by reference into this Form 10-K or our other securities filings and is not a part of such filings.
Information about the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330 or 1-202-551-8090. You can also access our filings through the SEC’s internet address site: www.sec.gov, under our Nasdaq ticker COSM.
Item 1A. Risk Factors
The Company is not required to provide the information called for in this item due to its status as a Smaller Reporting Company, however we describe below some of the risks we believe are material to our business. You should carefully consider the following risks in evaluating us and our business. You should also refer to the other information set forth in this report, including the information set forth in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our consolidated financial statements and the related notes. Our business prospects, financial condition or results of operations could be adversely affected by any of the following risks.
Regulatory and Litigation Risks
Laws and regulations regarding our business may prohibit or restrict our ability to sell our products in some markets or require us to make changes to our business model in some markets. Our products, business practices and manufacturing activities are subject to extensive government regulations and could be subject to additional laws and regulations.
Taxation and transfer pricing could adversely affect our results of operations and financial condition
We are subject to foreign tax and intercompany pricing laws, including those relating to the flow of funds between our U.S. parent company and our foreign subsidiaries. These pricing laws are designed to ensure that appropriate levels of income and expense are reported by our U.S. and foreign entities, and that they are taxed appropriately. Regulators in the United States and in foreign markets closely monitor our corporate structures, intercompany transactions, and how we effectuate intercompany fund transfers. Our effective tax rate could increase, and our results of operations and financial condition could be materially adversely affected if regulators challenge our corporate structures, transfer pricing methodologies or intercompany transfers. We are eligible to receive foreign tax credits in the United States for certain foreign taxes actually paid abroad. In the event any audits or assessments are concluded adversely to us, we may not be able to offset the consolidated effect of foreign income tax assessments through the use of U.S. foreign tax credits. Because the laws and regulations governing U.S. foreign tax credits are complex and subject to periodic legislative amendment, we may not be able to take advantage of any foreign tax credits in the future. In addition, changes in the amount of our total and foreign source taxable income may also limit our ability to take advantage of foreign tax credits in the future. The various customs, exchange control and transfer pricing laws are continually changing, and are subject to the interpretation of governmental agencies. We collect and remit value-added taxes and sales taxes in jurisdictions and states in which we have determined that nexus exists. Despite our efforts to be aware of and to comply with such laws and changes to the interpretations thereof, we may not be able to continue to operate in compliance with such laws. We may need to adjust our operating procedures in response to these interpretational changes, and such changes could have a material adverse effect on our results of operations and financial condition.
Changes in consumers behavior
Consumer behavior in recent years shows an increasing trend in the Health-Medicines sector, especially during the period of health crisis. It is observed that shopping habits and consumer behavior in general have changed in the midst of the coronavirus pandemic. The coronavirus pandemic and the responses thereto around the world could adversely impact our business and operating results. Consumers have turned to basic necessities and digital channels and e-commerce while physical networks are underperforming.
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Management of further developments
In recent years, the Company has been increasing its turnover, while expanding its range of products and its own branded nutraceutical products, has acquired the latest technology drug storage systems to ensure quality and accuracy (zero error rates) in their distribution. The further increase of the Company’s operations may lead, among other things, to increased capital needs, new investments in equipment and information systems, and requirements for capacity building. Failure to raise new capital will have a significant impact on the non-implementation of the required investments necessary to increase sales. Under these conditions, the growth of the Company’s activity, its financial results and its financial situation will be negatively affected.
Currency exchange rate fluctuations could adversely affect our results of operation and financial condition
In 2022, we recognized 100% percent of our net sales in markets outside the United States, the majority of which were recognized in each market’s respective local currency. We purchase inventory from companies in foreign markets, some of them in U.S. dollars. In preparing our financial statements, we translate net sales and expenses in foreign countries from their local currencies into U.S. dollars using average annual exchange rates. Because our sales are in foreign countries, exchange rate fluctuations may have a significant effect on net sales and earnings. Our reported earnings have been significantly affected by fluctuations in currency exchange rates, with net sales and earnings generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar.
Geopolitical issues, conflicts and other global events could adversely affect our results of operations and financial condition
Because our business is conducted outside of the United States, it is subject to global political issues and conflicts such as the current war in the Ukraine. Such political issues and conflicts could have a material adverse effect on our results of operations and financial condition if they escalate in areas in which we do business. In addition, changes in and adverse actions by governments in foreign markets in which we do business could have a material adverse effect on our results of operations and financial condition.
Climate change and related legislation or regulations may adversely impact our business, including potential financial, operational and physical impacts.
The nature of our business has not required any material capital expenditures to comply with federal, state or local provisions enacted or adopted regulating the discharge of materials into the environment. No material capital expenditures to meet such provisions are anticipated. Such regulatory provisions did not have a material effect upon our results of operations or competitive position during the year ended December 31, 2022.
Cybersecurity risks and the failure to maintain the integrity of data could expose us to data loss, litigation and liability, which could adversely affect our results of operations and financial condition.
We collect and retain large volumes of data from employees and independent consultants, including credit card numbers and other personally identifiable information, for business purposes, including transactional and promotional purposes. Our various information technology systems enter, process, summarize and report such data. The integrity and protection of this data are critical to our business. We are subject to significant security and privacy regulations, as well as requirements imposed by the credit card industry. Similarly, a failure to adhere to the payment card industry’s data security standards could cause us to incur penalties from payment card associations, termination of our ability to accept credit or debit card payments, litigation and adverse publicity, any of which could have a material adverse effect on our business and financial condition. Maintaining compliance with these evolving regulations and requirements could be difficult and may increase costs. In addition, a penetrated or compromised data system or the intentional, inadvertent, or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of company, employee, consultant or guest data which could adversely affect our reputation, disrupt our operations, or result in remedial and other costs, fines or lawsuits, which could have a material adverse effect on our results of operations and financial condition. Although we take measures to protect the security, integrity and confidentiality of our data systems, we experience cyber-attacks of varying degrees and types on a regular basis. Our infrastructure may be vulnerable to these attacks, and in some cases, it could take time to discover them. Breaches of our data systems, or those of our vendors, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware or malware, employee or insider error, malfeasance, social engineering, vendor software supply chain compromises, physical breaches or other actions, could result in material interruptions or malfunctions in our or such vendors’ websites, applications, data processing, or disruption of other business operations. For various reasons or circumstances, our employees may work remotely from time to time. For example, many of our employees have worked remotely in response to the spread of the COVID-19 pandemic. During such times, remote access heightens the risk of a cyber-attack. Additionally, outside parties may attempt to fraudulently induce employees, users, or customers to disclose sensitive information to gain access to our data or our users’ or customers’ data. Any such breach or unauthorized access could result in the unauthorized disclosure, misuse or loss of sensitive information and lead to significant legal and financial exposure, regulatory inquiries or investigations, loss of confidence by our sales force, disruption of our operations and damage to our reputation. These risks are heightened as we work with third-party partners and as our sales force uses social media, as the partners and social media platforms could be vulnerable to the same types of breaches.
We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. A cyber-attack could also lead to litigation, fines, other remedial action, heightened regulatory scrutiny and diminished customer confidence. In addition, our remediation efforts may not be successful, and we may not have adequate insurance to cover these losses. The unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could have a material adverse effect on our business, results of operations, cash flows and financial condition. Moreover, cyber-attacks against the Ukrainian government and other countries in the region have been reported in connection with the recent conflicts between Russia and Ukraine. To the extent such attacks have collateral effects on global critical infrastructure or financial institutions or us, such developments could adversely affect our business, operating results and financial condition. At this time, it is difficult to assess the likelihood of such threat and any potential impact at this time.
Inflation and rising interest rates
In 2022, EU annual inflation reached the highest level ever measured at 9.2%. Compared with 2021, when the annual value was 2.9%, it more than tripled. The annual average change in the harmonized index of consumer prices (HICP) in the EU during the period 2013-2022 was 2.1%. Annual inflation also increased in these three economies: the United States hit 8.7% (just below the EU), Japan’s inflation reached 2.5%, while China was the lowest of the four with 2.0%. The high inflation has adversely affected our business due to the higher costs of purchasing raw materials, the higher transportation costs and the significantly increased operating costs. Moreover, the significant rise in the interest rates during 2022 may also adversely affect our business since most of our loan facilities carry floating interest rates and this may cause increased financing outflows.
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Inflation Reduction Act of 2022
The Inflation Reduction Act of 2022, or IRA, includes several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delay until January 1, 2032 the implementation of the HHS rebate rule that would have limited the fees that pharmacy benefit managers can charge. Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one rare disease designation and for which the only approved indication is for that disease or condition. If a product receives multiple rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption. The effects of the IRA on our business and the healthcare industry in general is not yet known.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
The Company rents four corporate offices:
| · | U.S. Office corporate office is located at 141 W. Jackson Blvd, Suite 4236, Chicago, Illinois 60604. The first rent lease commenced in 2015 and has been amended several times throughout the years. The last amendment to that lease was on May 27th, 2022 through May 31, 2023. The monthly rate is currently $817.50 per month. |
| · | The Greece office of SkyPharm is located at 5, Agiou Georgiou Street, 57001, Pylaia, Thessaloniki, Greece. The Company has renewed the lease for a three-year period which commenced on September 1, 2020 at the rate of €8,506 ($8,960) per month. |
| · | The offices of Decahedron are located at Unit 14 Spice Green Centre, Flex Meadow, Harlow, CM19 5TR, Essex, U.K. The commencement of the lease was on September 25, 2020 at the rate of ₤3,500 ($4,817) per month. |
| · | The offices of Cosmofarm are located at Gonata Stylianou 15, Peristeri, Attiki, Greece 12133. The Company has a ten-year lease which commenced on July 18, 2018, at the rate of €4,000 ($4,214) per month. The Company rents additional square footage at Gonata Stylianou 22 street. The Company has a seven-year lease which commenced on October 1, 2022, at a rate of €400 ($421) per month. |
Each of the above facilities is adequate for the Company’s current needs.
Item 3. Legal Proceedings
We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4. Mine Safety Disclosures
None
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PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock has been quoted through various over-the-counter systems at various times since 2009. Our common stock became listed on the Nasdaq Capital Market on February 28, 2022 under the symbol “COSM.” Our common stock was previously quoted on the OTC QX.
Holders of Our Common Stock
As of December 31, 2022, we had 10,605,412 shares of our common stock issued and 10,589,915 shares outstanding, held by approximately 482 stockholders of record. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of various broker-dealers and registered clearing agencies.
Dividends
We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. We intend to retain future earnings, if any, to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our future payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors that our board of directors may deem relevant. Our accumulated deficit currently limits our ability to pay dividends.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. While our common stock is currently listed on the Nasdaq Capital Market and not subject to the penny stock rules, should we not be able to maintain our listing on Nasdaq, the penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
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In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
Securities Authorized for Issuance under Equity Compensation Plans
Omnibus Equity Incentive Plan
On September 19, 2022 the Company held a Board of Directors meeting, whereas, the Board of Directors had elected to adopt an Omnibus Equity Incentive Plan (the “Plan”), that includes reserving 200,000 shares of common stock eligible for issuance under the Plan to be registered on a Form S-8 Registration Statement with the SEC. The Plan is designed to enable the flexibility to grant equity awards to the Company’s officers, employees, non-employee directors and consultants and to ensure that it can continue to grant equity awards to eligible recipients at levels determined to be appropriate by the Board and/or the Compensation Committee. According to the Proxy Statement filed with the SEC on October 20, 2022 the Plan was subject to final approval by the Company’s stockholders at the Annual Meeting of Stockholders held on December 2, 2022 when the Plan was approved.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.
We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.
Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Presentation of Information
As used in this prospectus, the terms “we,” “us” “our” and the “Company” mean Cosmos Health Inc. unless the context requires otherwise. The following discussion and analysis should be read in conjunction with our audited (and unaudited) financial statements and the related notes that appear elsewhere in this prospectus. All dollar amounts in this registration statement refer to U.S. dollars unless otherwise indicated.
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Overview
Summary
We are an international pharmaceutical company with a proprietary line of nutraceuticals and distributor of branded and generic pharmaceuticals, nutraceuticals, OTC medications and medical devices. The Company uses a differentiated operating model based on a lean, nimble and decentralized structure, with an emphasis on acquisitions of established companies and our ability to maintain better pharmaceutical assets than others. This operating model and the execution of our corporate strategy are designed to enable the Company to achieve sustainable growth and create added value for our shareholders. In particular, we look to enhance our pharmaceutical and over-the-counter product lines by acquiring or licensing rights to additional products and regularly evaluate selective company acquisition opportunities. The Company, through its subsidiaries, is operating within the pharmaceutical industry and in order to compete successfully in the healthcare industry, must demonstrate that its products offer medical benefits as well as cost advantages. Currently, most of the products that the Company is trading, compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future.
We continue to rapidly expand our distribution network worldwide and open new markets for our proprietary line of branded pharmaceuticals, nutraceuticals, and nutraceuticals through our distribution channels and e-commerce market place. We use our extensive network with direct access to Europe’s primary sales channels for pharmaceuticals and nutraceuticals, which includes over 160 pharmaceutical wholesale distributors in Europe’s largest markets, over 40,000 pharmacies in Europe and 1,500 pharmacies in Greece. We achieve stable supply of pharmaceuticals from Doc Pharma, a related party, which enhances our ability to scale our expansion. We receive full priority in the production of nutraceuticals and volumes. Our full production in Greece ensures a decisive production-cost advantage whilst we secure additional discounts by leveraging our purchasing scale.
Our focus on investing in technology enhances yield cost savings and economies of scale the safety, distribution and warehousing efficiency and reliability, as a result of 0% error selection rate and acceleration order fulfillment.
Revenue sources
The Company operates in the wholesale distribution of branded pharmaceutical products, OTC products, medical devices, vitamins and a variety of nutraceuticals, including its proprietary label.
Import/Export of Branded pharmaceuticals
We conduct wholesale import and export of branded pharmaceutical products throughout Europe by our subsidiaries. We source licensed pharmaceuticals from wholesalers at a lower cost, primarily in Greece and the UK and sell to other European wholesalers. Our capital efficient business model is based on infrastructure, efficiency and scale.
Full-line Wholesale
We conduct direct distribution and sales of pharmaceuticals, medical devices, branded pharmaceuticals and OTC products. Our distribution network exceeds over 1,500 pharmacies in Greece. We have created an upgraded and high-end distribution center in Greece due to our Robotic systems and integrated automations (“ROWA” robotics).
Nutraceutical
We have created and developed our own proprietary branded nutraceutical products, named “Sky Premium Life®” which was launched in 2018 and “Mediterranation®” which was launched in 2022. Utilizing unique formulations, and specialized extraction processes which follow strict pharmaceutical standards, our proprietary lines of nutraceuticals aim for excellence. We have a full portfolio of fast moving and specialty formulas with at more than 80 product codes including vitamins, minerals and other herbal extracts. We expect to reach 150 product codes by the end of 2023. Our nutraceutical products are manufactured exclusively by Doc Pharma, a related party of the Company. Our nutraceutical products have penetrated several markets within 2021 & 2022 through digital channels such as Amazon and Tmall.
We focus on nutraceutical products because we foresee it as a relatively under-penetrated market throughout Europe with potential of high growth opportunities due to its large market size and margin contribution as the demand for nutraceutical products is increasing globally.
Branded pharmaceuticals
We are engaged in the promotion, distribution and sale of branded pharmaceutical products throughout Europe. Through a related company, we have the distribution rights to over 70 fast-moving pharmaceutical products. There is a significant growth on opportunities through product additions and geographic expansion.
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Risks
Supply chain disruption is a growing concern for the European pharmaceutical industry as it increasingly looks to cut costs by relying on ‘emerging markets’, where standards can be lower in terms of compliance, ethics and health and safety. Our business depends on the timely supply of materials, services and related products to meet the demands of our customers, which depends in part on the timely delivery of materials and services from suppliers and contract manufacturers. Significant or sudden increases in demand for our products, as well as worldwide demand for the raw materials and services we require to manufacture and sell our products, may result in a shortage of such materials or may cause shipment delays due to transportation interruptions or capacity constraints. Such shortages or delays could adversely impact our suppliers’ ability to meet our demand requirements. Difficulties in obtaining sufficient and timely supply of materials or services can have an adverse impact on our manufacturing operations and our ability to meet customer demand.
We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products, increased costs or customer order cancellations as a result of:
• the failure or inability to accurately forecast demand and obtain sufficient quantities of quality raw materials on a cost-effective basis;
• volatility in the availability and cost of materials or services, including rising prices due to inflation;
• difficulties or delays in obtaining required import or export approvals;
• shipment delays due to transportation interruptions or capacity constraints, such as reduced availability of air or ground transport or port closures;
• information technology or infrastructure failures, including those of a third-party supplier or service provider; and
• natural disasters or other events beyond our control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or extreme weather conditions, fires, regional economic downturns, regional or global health epidemics, including the ongoing COVID-19 pandemic, geopolitical turmoil, increased trade restrictions between the U.S. and China and other countries, social unrest, political instability, terrorism, or acts of war) in locations where we or our customers or suppliers have manufacturing or other operations.
Hikes in the price of medicine and their impact on the sustainability of the healthcare systems are garnering more and more attention. European regulators are willing to play their part in safeguarding continued access to safe and effective medicines. Regulators can speed up the approval of branded pharmaceuticals and biosimilars to boost competition and drive down prices.
Cuts in healthcare spending have been frequently occurring since the financial crises of the late of 2000’s. Europe’s slow recovery has been uneven, with austerity and economic uncertainty, especially in the EU’s poorer member states, such as Greece.
Results of Operations
Year ended December 31, 2022 versus December 31, 2021
For the year ended December 31, 2022, the Company had a net loss of $13,830,371 on revenue of $50,347,652, versus a net loss of $7,961,649 on revenue of $56,239,667, for the year ended December 31, 2021.
Revenue
Revenue during the Company’s twelve-month period ended December 31, 2022, decreased by 10.48% as compared to revenues in the period ended December 31, 2021.
Our future revenue growth will continue to be affected by various factors such as industry growth trends, including drug utilization, the introduction of new innovative brand therapies, the likely increase in the number of generic drugs that will be available over the next few years as a result of the expiration of certain drug patents held by brand-name pharmaceutical manufacturers and the rate of conversion from brand products to those generic drugs, price increases and price deflation, general economic conditions in the member states of European Union, competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, increased downward pressure on government and other third party reimbursement rates to our customers, and changes in government rules and regulations.
Cost of Goods Sold
For the year ended December 31, 2022, we had direct costs of goods sold of $44,390,695 associated to cost of goods sold versus $47,909,180 from the prior fiscal year ended December 31, 2021. Cost of goods sold year over year decreased by 7.34% in 2022 as compared to 2021, in accordance with the decrease in revenue.
Gross Profit
Gross profit for the year ended December 31, 2022 was $5,956,957 compared with the $8,330,487 for the year ended December 31, 2021. Gross profit decreased by $2,373,530 or 28.49% from the prior fiscal year. The decrease in the gross profit was primarily due to the slight decrease in sales of our own brand of nutraceuticals, SkyPremium Life, during the last quarter of 2022, in order for the Company to achieve a decrease in the outstanding receivables.
Operating Expenses
For the year ended December 31, 2022, we had general and administrative costs of $10,183,025, salaries and wages expenses of $2,429,021 sales and marketing expenses of $630,057 and depreciation and amortization expense of $188,890 for a net operating loss of $7,474,036 For the year ended December 31, 2021, we had general and administrative costs of $9,208,701, salaries and wages of $2,472,953, sales and marketing expenses of $732,545 and depreciation and amortization expense of $449,692 for a net operating loss of $4,533,404.
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Interest Expenses
For the year ended December 31, 2022, we had interest expense of $2,109,061 and non-cash interest expenses of $1,619,838 related to the amortization of debt discounts arising from debt modification and extinguishment events, versus the year ending December 31, 2021, where we had interest expense of $2,823,842 and non-cash interest expenses of $757,021 related to the amortization of debt discounts arising from debt modification and extinguishment events.
Unrealized Foreign Currency Losses & Deemed Dividends
Additionally, we had an unrealized foreign currency translation loss of $981,014 for the year ended December 31, 2022, deemed dividends on the issuance and down round of warrants, on warrants exchanges and on preferred stock of $50,114,914 such that our net comprehensive loss for the period was $64,926,299 versus unrealized foreign currency loss of $1,006,517 and deemed dividend in the amount of $7,633,033 which concerned the anti-dilution adjustment of the Company’s outstanding warrants, such that our net comprehensive loss for the period was $16,601,199 for the year ended December 31, 2021. The significant increase relates to the additional deemed dividend amounts that arose from the Company’s multiple offerings and warrants issuances within 2022.
Going Concern
The Company’s consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had net loss of $13,830,371, and net cash used in operations of $14,870,639 during the year ended December 31, 2022, and positive working capital of $34,296,033 and an accumulated deficit of $66,232,813 as of December 31, 2022. During the fiscal year, the Company has undergone a strategic review process to help find a definitive solution to the Company’s accumulated deficit constraints. Options under consideration in the strategic review process include, but are not limited to, securing new debt, exchange debt for equity, restructuring current debt facilities from short term into long-term making the proper actions for new fund raising. The Company has adequate cash from operations in order to cover its operating costs and to continue as a going concern for the next 12 months.
The Company’s revenues are not able to sustain its operations, and concerns exist regarding the Company’s ability to meet its obligations as they become due. The Company is subject to a number of risks to those of smaller commercial companies, including dependence on key individuals and products, the difficulties inherent in the development of a commercial market, the need to obtain additional capital, competition from larger companies, and other pharmaceutical and health care companies.
Management evaluated the above conditions which raise substantial doubt about the Company’s ability to continue as a going concern to determine if it can meet its obligations for the subsequent twelve months from the date of this filing. Management considered its ability to access future capital, curtail expenses if needed, expand product lines, and acquire new products. Based on the management’s evaluations, it has devised a plan in order to meet its obligations for the next twelve months.
Management’s plans include expansion of brand name products to the market, expanding the current product portfolio, and evaluating acquisition targets to expand distribution. Furthermore, the Company intends to vertically integrate the supply chain distribution network. Finally, the Company plans to access the capital markets further in order to raise additional funds through equity offerings.
Additionally, as of December 31, 2022, the Company's cash reserves amounted to $20.7 million compared to $286 thousand as of December 31, 2021. During the year ended December 31, 2022, the Company raised $46.0 million from equity financings, fortifying its capital position. In addition, the Company received $10.5 million during the year from the exercise of warrants. The Company used cash proceeds to reduce its debt by approximately $15.1 million from $26 million as of December 31, 2021 to $10.9 million as of December 31, 2022.
It is management’s conclusion that these plans above, collectively, alleviate the conditions that raised substantial doubt about the Company’s ability to continue as a going concern. Therefore, it is determined that no substantial doubt exists about the Company’s ability to continue as a going concern for a period of twelve months from the date of this filing.
Liquidity and Capital Resources
As of December 31, 2022, the Company had working capital of $34,296,033 versus a working capital of $9,904,925 as of December 31, 2021. This increase in the working capital surplus is primarily attributed to the Company’s cash provided by financing activities during the year ending as of December 31, 2022.
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As of December 31, 2022, the Company had net cash of $20,749,683 versus $286,487 as of December 31, 2021. For the year ended December 31, 2022, net cash used in operating activities was $14,870,639 versus $7,097,174 net cash used in operating activities for the year ended December 31, 2021. The Company has devoted substantially all of its cash resources to apply its investment program to expand through organic business growth and, where appropriate, the execution on selective company and license acquisitions, and incurred significant general and administrative expenses to enable it to finance and grow its business and operations.
During the year ended December 31, 2022, there was $21,497 net cash used in investing activities versus $826,817 used in during the year ended December 31, 2021. In the year ended December 31, 2021 this was due to the purchase of fixed assets and licenses.
During the year ended December 31, 2022, there was $35,048,288 of net cash and cash equivalents provided by financing activities versus $7,267,777 provided by financing activities during the year ended December 31, 2021. The significant increase is attributable to a preferred-stock offering that took place within February 2022 and the two common stock offerings that occurred within October and December 2022 for total net proceeds of approximately $40 million. Additionally, the substantial proceeds of approximately $11 million from the warrant exercises also contributed to this increase. The Company also repaid approximately $15.1 million of debt using the proceeds from the aforementioned offerings.
We believe that our current cash in our bank account and working capital as of December 31, 2022, will satisfy our estimated operating cash requirements and our plans for potential acquisitions for the next twelve months.
We anticipate using cash on hand as of December 31, 2022, cash generated from operations of the Company, and cash flows from debt and equity financing to the extent that funds are available to do so in order to conduct our business operations over the upcoming year.
Debt Obligations
June 9, 2022 Debt Agreement
On June 9, 2022 the Company entered into an agreement with a third-party lender in the principal amount of €320,000 ($335,008). The note matures on June 16, 2027 and bears an annual interest of 3.89% plus levy of 0.60% plus the 3-month Euribor (when positive). Pursuant to the agreement, there is a twelve-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 17 equal quarterly installments of €18,824 commencing on June 30, 2023. As of December 31, 2022 the Company has accrued interest of $8,379 and an outstanding balance of €320,000 ($342,336), of which $281,924 is classified as Notes payable – long term portion on the accompanying consolidated balance sheet.
September 17, 2021 Convertible Promissory Note
On September 17, 2021 (the “Issue Date”), the Company entered into a convertible promissory note and securities purchase agreement with an unaffiliated third party for a purchase price of $525,000 in principal amount for cash proceeds of $500,000. The note was issued with an original issue discount (“OID”) of $25,000, bears an interest rate of 10%. The outstanding balance as of December 31, 2022 was $0.
July 30, 2021 Debt Agreement
On July 30, 2021, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($578,850). The note matures on August 5, 2026 and bears an annual interest rate that applies to 60% of the principal of the note that is based on a 365-day year, of 3.50% plus 3-month Euribor when Euribor is positive. During the year ended December 31, 2022, the Company repaid €77,985 ($83,428) of the principal. As of December 31, 2022, the Company has accrued interest of $2,728 and a principal balance of €422,015 ($451,472), of which $336,788 is classified as Notes payable – long term portion on the consolidated balance sheet.
January 7, 2021 Convertible Promissory Note
On January 7, 2021 (the “Issue Date”), the Company entered into a subscription agreement with an unaffiliated third party, whereby the Company issued for a purchase price of $100,000 in principal amount, a convertible promissory note. The note bears an interest rate of 8% per annum. The outstanding balance as of December 31, 2022, was $100,000. On February 7, 2023, the Company fully repaid the outstanding balance and interest of the January 7, 2021, $100,000 Convertible Promissory Note.
December 21, 2020 Convertible Promissory Note
On December 21, 2020 the Company entered into a convertible promissory note with a third-party lender. The Company issued the $540,000 Note in exchange for $500,000 in cash and included a $40,000 Original Issue Discount (“OID”) and paid $3,000 in financing costs. The principal amount together with interest at the rate of 8% per annum, compounded annually , is due at maturity, December 31, 2021. The Company has converted a total of $540,000 of the Note to shares of common stock and the outstanding balance as of December 31, 2022 was $0.
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November 19, 2020 Debt Agreement
On November 19, 2020, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($611,500). The note matures on November 18, 2025 and bears an annual interest rate, based on a 360-day year, of 3.9% plus 6-month Euribor when Euribor is positive. During the year ended December 31, 2022, the Company repaid €111,111 ($118,867) of the principal and as of December 31, 2022, the Company has accrued interest of $8,069 related to this note and a principal balance of €333,333 ($356,600), of which $237,733 is classified as Notes payable – long term portion on the consolidated balance sheet.
August 4, 2020 Senior Promissory Note
On August 4, 2020, the Company executed a Senior Promissory Note (the “August 4 Note”) in the principal amount of $3,000,000 payable to an unaffiliated third-party lender. The August 4 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. On October 29, 2020, the Company entered into a debt exchange agreement with the lender whereby the Company issued 259,741 shares of common stock at the rate of $3.85 per share in exchange for an aggregate of $1,000,000 principal amount of the existing loan. The August 4 Note matured on December 31, 2020. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023.
The outstanding balance of the Note as of December 31, 2022 was $0, since the Note was fully repaid within December 2022.
July 3, 2020 Senior Promissory Note
On July 3, 2020, the Company executed a Senior Promissory Note (the “July 3 Note”) in the principal amount of $5,000,000 payable to an unaffiliated third-party lender. The July 3 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The July 3 Note matures on June 30, 2022 unless in default. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023. The outstanding balance of the Note as of December 31, 2022, was $0 since the Note was fully repaid within December 2022.
June 30, 2020 Note
On June 30, 2020, SkyPharm entered into a settlement agreement on an existing loan facility agreement with a third-party lender, whereby SkyPharm agreed to make certain payments to the creditor and the creditor will accept such payments as full discharge of outstanding debt. In accordance with the settlement agreement, interest will accrue from June 30, 2020, until repayment in full at a rate of 6% per annum for the first year and 5.25% per annum for the second year.
On August 4, 2021, the Company entered into an exchange agreement with the creditor whereby the Company agreed to the following:
- Issue on August 4, 2021, 321,300 shares of common stock to settle $1,606,500 (€1,350,000) of debt. The Company recorded a gain on settlement of $292,383 upon the issuance of the 321,300 shares.
- Agreed to issue no more than 238,000 shares of common stock upon approval of the listing of the Company’s common stock to Nasdaq to settle $1,190,000 (€1,000,000) of debt. The Company issued these shares subsequent to December 31, 2021.
As of December 31, 2022, the Company has accrued interest expense of $0 and the principal balance of the debt is $0.
May 18, 2020 Senior Promissory Note
On May 18, 2020, the Company executed a Senior Promissory Note (the “May 18 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender. The May 18 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 18 Note matured on December 31, 2020. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023. The outstanding balance of the Note as of December 31, 2022 was $0, since the Note was fully repaid within December 2022.
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Trade Facility Agreements
On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”) as amended on November 16, 2017, and May 16, 2018.
On October 17, 2018, the Company entered into a further amended agreement with Synthesis whereby the current balance on the SSCTF as of October 1, 2018, which was €4,866,910 ($5,629,555) and related accrued interest of €453,094 ($524,094) would be split into two principal balances of Euro €2,000,000 and USD $4,000,000. Interest on the new balances commenced on October 1, 2018, at 6% per annum plus one-month Euribor, when it is positive, on the Euro balance and 6% per annum plus one-month Libor on the USD balance. The original loan of the USD $4,000,000 matured on August 31, 2021.
On March 3, 2022, the Company signed an extension to the facility agreement relating to the USD $4,000,000. Based on the updated repayment terms the facility’s final repayment date was extended to January 2023.
On December 21, 2022, Synthesis signed an assignment agreement with GIB Fund Solutions ICAV, where the full benefits & obligations related to the $4,000,000 Note were assigned to GIB.
On January 31, 2023, a settlement agreement was signed between Cosmos Health, SkyPharm SA and GIB Fund Solutions ICAV, where GIB after confirming the capital repayment of $2,500,000 received during December 2022, agreed to receive an additional payment of $1,100,000 during January 2023 and waive the remaining outstanding balance of the $4,000,000 Note in full. The above payment was made by Cosmos Health on behalf of SkyPharm SA during January 2023 and thus the Note was fully settled.
On December 22, 2022, Skypharm SA signed an agreement for the extension of the payments and an increase in interest rate due under the Varengold loan (€2,000,000 portion of the Trade Facility), that was extended to be repaid with a balloon payment now due on October 31, 2025. This extension was agreed upon in writing on December 22, 2022 with a retroactive modification date to October 31, 2022 (the original maturity date) between SkyPharm SA, (the “Borrower”) and Varengold Bank AG (the “Lender”)
During December 2022, the Company repaid $2,593,363 of the $4,000,000 Note and $187,215 of the €2,000,000 Note balance such that as of December 31, 2022, the Company had principal balances of €1,775,000 ($1,898,895) and $1,406,637 under the agreements, of which $1,604,700 is classified as Notes payable-long term on the consolidated balance sheet and the Company had accrued $20,604 and $169 respectively, in interest expense related to these agreements.
COVID-19 Government Loans
On May 12, 2020, the Company’s subsidiary, SkyPharm, was granted and on May 22, 2020 the Company received a €300,000 ($366,900) loan from the Greek government. During the year ended December 31, 2021, the Company received a waiver of 50% forgiveness of the loan and recorded $177,450 as other income. During the year ended December 31, 2022, the Company repaid €9,375 ($10,029) of the principal of this loan. As of December 31, 2022, the principal balance was $150,441.
On June 24, 2020, the Company received a loan £50,000 ($68,310) from the United Kingdom government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time. The Company repaid £722.97 ($773) of principal during the year ended December 31, 2022, and the balance as of December 31, 2022 was £47,144 ($56,936).
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Related Party Indebtedness
Grigorios Siokas
From time to time, Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans.
During the twelve-month period ended December 31, 2022 the Company borrowed additional proceeds of $2,933,165 and €656,750 ($702,591) and repaid $3,045,000 and €1,688,800 ($1,806,678) of these loans, respectively. As of December 31, 2022, the Company had a total outstanding balance under these loans of $12,821.
December 20, 2018 Note
On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed by SkyPharm pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum and had a maturity date of March 18, 2019. As of December 31, 2022, the Company fully repaid the Note and thus had an outstanding balance of €0 ($0) and accrued interest of €192,891 ($206,355).
Grigorios Siokas is the Company’s CEO and principal shareholder and is hence considered a related party to the Company.
Dimitrios Goulielmos
On November 21, 2014, SkyPharm entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer of the Company, pursuant to which the Company borrowed €330,000 ($401,115) from Mr. Goulielmos. The Loan bore an interest rate of 2% per annum and was due and payable in full on May 11, 2015. As of December 31, 2022, the Company had an outstanding principal balance of €10,200 ($10,912) and €0 ($0) accrued interest.
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Plan of Operation in the Next Twelve Months
Specifically, our plan of operations for the next 12 months is as follows:
We assess the foreseeable development of the Company as being positive. Over the medium term we expect to further expand our market share. However, during the course of further organizational optimization there may be associated extraordinary additional costs.
Our plan for our own branded nutraceuticals is to enlarge our portfolio up to 150 SKUs by the end of 2023, including more basic line formulas to cover more customer needs of any age, advanced formulations, formulas based on herbs and further clinical studies with R&D for further products. Our plan for geographic expansion in distributing and market penetration in the EU, Asia, USA and Canada is based on exclusive distributors, wholesalers, e-commerce, development of franchising model, alliances and acquisitions of nutraceutical companies.
In addition, our plan for branded pharmaceuticals is geographic expansion across the world, especially in the EU and UK, as well as in other countries with fast registration and developed markets with liberalized OTC policies for online pharmacies and supermarkets. We also intend to enhance our exclusive distribution rights with a growing basis of cooperating partners whilst purchasing generic, biosimilar drugs and OTC licenses. We also intend to enhance our product expectance by registered copyrights and trademarks in all OTC drugs. In addition, we remain committed to strategic research and development across each business unit with a particular focus on assets with inherently lower risk profiles and clearly defined governmental regulatory pathways.
Our plan for our full line wholesale is to expand in the Greek territory, enlarge our customer portfolio and integrate of established sales network of pharmacies through the use of B2B and B2C e-commerce platforms and exclusive distributors. We are also aiming in increasing the exports of branded pharmaceuticals as we focus on higher profit margins categories (OTC and VMS), deliver 3PL (third-party logistics) services to pharma companies, put in force loyalty programs, provide added value services to pharmacies and emergency deliveries to VIP customers. The Company will evaluate and, where appropriate, execute on opportunities to expand its network of pharmacies and products in areas that it believes will offer above average growth characteristics and attractive margins.
The Company is growing its business through organic growth, market penetration, geographic expansion and acquisitions which would add value to its business and its shareholders. The Company is also committed to pursuing various forms of business development; this can include trading, alliances, joint ventures and dispositions. Moreover, it hopes to continue to build on its portfolio of pharmaceutical products and expand its OTC and nutraceutical product portfolio. Thus, the Company is developing a sound sales distribution network specializing in its own branded nutraceutical products.
The Company’s main objective is expanding the business operations of its subsidiaries by concentrating its efforts on becoming an international pharmaceutical Company. The Company views its business development activity as an enabler of its strategies, and it seeks to generate earnings growth and enhance shareholder value by pursuing a disciplined, strategic, and financial approach to evaluating business development opportunities. Under these principles the Company assesses businesses and assets as part of its regular, ongoing portfolio review process and continues to consider trading development activities for its businesses. The Company’s objective is the optimization of operating expenses across all entities without compromising the quality of the Company’s services and products.
Changes in the behavior and spending patterns of purchasers of pharmaceutical and healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of doctor visits, and foregoing healthcare insurance coverage, may impact the Company’s business.
The pharmaceutical sector offers a large growth potential within the European pharmaceutical market if service, price and quality are strictly directed towards the customer requirements. The Company will continue to encounter competition in the market by product, service, reliability, and a high level of quality. On the procurement side, the Company can access a wide range of supply possibilities. To minimize business risks, the Company diversifies its sources of supply all over Europe. It secures its high-quality demands through careful supplier qualification and selection, as well as active suppliers’ system management.
While the Company intends to pursue these milestones, there may be circumstances where, for valid business reasons or due to factors beyond the control of the Company (e.g., the COVID-19 pandemic), a re-allocation of efforts may be necessary or advisable. Although the Company does not currently anticipate that the COVID-19 pandemic will cause material delays in the timelines or estimates set out above, due to the evolving nature of COVID-19 and its impacts, these timelines and estimates may require adjustment in the future.
The Company intends to spend the funds available to it in working capital, inventories, intangible assets, acquisitions, R&D, sales and marketing expenses. Due to the uncertain nature of the industry in which the Company will operate, projects may be frequently reviewed and reassessed. Accordingly, while it is currently intended by management that the available funds will be expended as set forth above, actual expenditures may in fact differ from these amounts and allocations.
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Significant Equipment
We do not intend to purchase any significant equipment for the next twelve months aside from a few pieces of IT equipment. Nevertheless, we will replace essential equipment for operations if it is required within the year.
Employees
In order to achieve our strategic objectives, we have, and will remain, focused on hiring and retaining a highly skilled management team that has extensive experience and specific skill sets relating to the sales, selection, development and commercialization of pharmaceutical products. We intend to continue our efforts to build and expand this team as we grow our business. We have plans to increase the number of our employees by adding more sales people during the next twelve months.
Off Balance Sheet Arrangements
As of December 31, 2022, there were no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management’s Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Foreign Currency. Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and the statements of operations are translated at the average rates of exchange for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity until the entity is sold or substantially liquidated. Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency) are included in net (loss) earnings.
Income Taxes. The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes, ASC 740 “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is liable for income taxes in Greece and the United Kingdom of England. The corporate income tax rate in Greece is 22%, (tax losses are carried forward for five years effective January 1, 2013) (prior to 2013, losses were carried forward indefinitely) and 19% in the United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.
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We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets.
We recognize the impact of an uncertain tax position in our financial statements if, in management’s judgment, the position is not more-likely-then-not sustainable upon audit based on the position’s technical merits. This involves the identification of potential uncertain tax positions, the evaluation of applicable tax laws and an assessment of whether a liability for an uncertain tax position is necessary. We operate and are subject to audit in multiple taxing jurisdictions.
We record interest and penalties related to income taxes as a component of interest and other expense, respectively.
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of the U.S. net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
The Company has net operating loss carry-forwards in our parent, Cosmos Health Inc., which are applicable to future taxable income in the United States (if any). Additionally, the Company has income tax liabilities in the United Kingdom of England. The income tax assets and liabilities are not able to be netted. We therefore reserve the income tax assets applicable to the United States, but recognize the income tax liabilities in Greece and the United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.
Accounts Receivable and Allowance for Doubtful Accounts
The Company follows ASC 310 to estimate the allowance for doubtful accounts. Pursuant to FASB ASC paragraph 310-10-35-9, losses from uncollectible receivables shall be accrued when both of the following conditions are met: (a) Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) The amount of the loss can be reasonably estimated. Those conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be made even though the particular receivables that are uncollectible may not be identifiable. The Company reviews individually each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay. Bad debt expense is included in general and administrative expenses, if any.
Inventory Reserves
Our merchandise inventories are made up of finished goods and are valued at the lower of cost or market using the weighted-average cost method. Average cost includes the direct purchase price, net of vendor allowances and cash discounts, of merchandise inventory. We record valuation reserves on an annual basis for merchandise damage and defective returns, merchandise items with slow-moving or obsolescence exposure and merchandise that has a carrying value that exceeds market value. These reserves are estimates of a reduction in value to reflect inventory valuation at the lower of cost or market. The reserve for merchandise returns is based upon the determination of the historical net realizable value of products sold from our returned goods inventory or returned to vendors for credit. Our reserve for merchandise returns includes amounts for returned product on-hand as well as for new merchandise on-hand that we estimate will ultimately become returned goods inventory after being sold based on historical return rates.
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Recently Issued Accounting Pronouncements
In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2022-06, Deferral of the Sunset Date of Reference Rate Reform (Topic 848). Topic 848 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The ASU is effective as of December 21, 2022 through December 31, 2024. We continue to evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. We adopted ASU 2022-06 during 2022. The ASU has not and is currently not expected to have a material impact on the Companies consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which was adopted on January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements. ASU 2022-02 also enhances the disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, the ASU amends the guidance on vintage disclosures to require entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU would be applied prospectively. Early adoption is also permitted, including adoption in an interim period. This ASU is currently not expected to have a material impact on the Company’s consolidated financial statements.
October 2021, the FASB issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. This guidance creates an exception to the general recognition and measurement principles of ASC 805, Business Combinations. This guidance should be applied prospectively and is effective for all public business entities for fiscal years beginning after December 15, 2022 and include interim periods. The guidance is effective for all other entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of ASU No. 2021-08 on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04—Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company adopted ASU 2021-04 on January 1, 2022. The adoption did not have a material impact on its consolidated financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
| 28 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Cosmos Health Inc. (f/k/a Cosmos Holdings, Inc.)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cosmos Health Inc. and its subsidiaries (collectively the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity (deficit) and mezzanine equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Inventory Valuation — Refer to Note 2 to the Financial Statements
Critical Audit Matter Description
The Company computes inventory using the weighted-average FIFO method. Inventory consists primarily of finished goods and packaging materials, i.e., packaged pharmaceutical products and the wrappers and containers they are sold in. The Company assesses inventory at each reporting date in order to assert that it is valued at the lower-of-cost or net realizable value. Most of the Company's inventory provisions are based on the Company's inventory levels and forecasted demand as well as physical condition, expiration date and current market conditions. Most of the Company's inventory items are eligible for return to suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.
Significant judgment is exercised by the Company to determine inventory carrying value adjustments, specifically the provisions for excess or obsolete inventories, which includes the following:
| · | Developing assumptions such as forecasts of future sales quantities and the selling prices, which are sensitive to the competitiveness of product offerings, customer requirements, and product life cycles. |
Given these factors and assumptions are forward-looking and could be affected by future economic and market conditions, the related audit effort to evaluate management's inventory valuation adjustments was extensive and required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures related to the Company's inventory valuation methodology included the following:
| o | Through an inventory observation conducted on December 31, 2022, we observed areas of the warehouse for any expired or damaged inventory and ensured such items were excluded from the Company’s inventory balances at year-end. |
| o | Assessed the reasonableness of the carrying value of inventory on the Company’s schedules through purchase price testing by obtaining recent sales invoices, purchase orders and payment support to determine if each selected item is carried at the lower-of-cost or net realizable value. |
| o | Assessed the Company’s inventory valuation allowance computation for reasonableness through recalculations of the value of inventory considered to be slow-moving or obsolete through a combination of ratio analysis and assessments of returns of inventory by customers made during the year. |
| o | Test the accuracy of product information noted in the Company’s inventory recordkeeping system, including product expiration dates, to ensure that the recalculation of the inventory reserve using product expiration dates on a system-generated output is accurate. |
We have served as the Company's auditor since 2019.
| /s/ Armanino LLP |
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April 12, 2023
(PCAOB ID 000
| F-1 |
COSMOS HEALTH INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
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| December 31, 2022 |
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| December 31, 2021 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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Accounts receivable, net |
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Accounts receivable - related party |
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Marketable securities |
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Inventory |
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Loans receivable |
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Loans receivable - related party |
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Prepaid expenses and other current assets |
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Prepaid expenses and other current assets - related party |
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TOTAL CURRENT ASSETS |
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Property and equipment, net |
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Goodwill and intangible assets, net |
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Loans receivable - long term portion |
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Loans receivable - related party - long term |
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Operating lease right-of-use asset |
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Financing lease right-of-use asset |
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Other assets |
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Deferred tax assets |
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TOTAL ASSETS |
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| $ |
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LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable and accrued expenses |
| $ |
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| $ |
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Accounts payable and accrued expenses - related party |
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Accrued interest |
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Lines of credit |
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Convertible notes payable, net of unamortized discount of $ |
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Derivative liability - convertible note |
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Notes payable |
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Notes payable - related party |
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Loans payable |
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Loans payable - related party |
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Taxes payable |
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Operating lease liability, current portion |
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Financing lease liability, current portion |
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Other current liabilities |
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TOTAL CURRENT LIABILITIES |
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Share settled debt obligation |
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Notes payable - long term portion |
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Operating lease liability, net of current portion |
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Financing lease liability, net of current portion |
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Other liabilities |
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TOTAL LIABILITIES |
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Commitments and Contingencies (see Note 14) |
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MEZZANINE EQUITY |
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Series A preferred stock, stated value $ |
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STOCKHOLDERS' EQUITY: |
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Common stock, $ |
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Additional paid-in capital |
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Subscription receivable |
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| ( | ) |
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Treasury stock, |
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| ( | ) |
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| ( | ) |
Accumulated deficit |
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| ( | ) |
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| ( | ) |
Accumulated other comprehensive loss |
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| ( | ) |
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| ( | ) |
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TOTAL STOCKHOLDERS' EQUITY |
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TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY |
| $ |
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| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
COSMOS HEALTH INC. | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||||||||
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| Years Ended December 31, |
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| 2022 |
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| 2021 |
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REVENUE |
| $ |
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| $ |
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COST OF GOODS SOLD |
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GROSS PROFIT |
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OPERATING EXPENSES |
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General and administrative expenses |
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Salaries and wages |
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Sales and marketing expenses |
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Depreciation and amortization expense |
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TOTAL OPERATING EXPENSES |
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LOSS FROM OPERATIONS |
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OTHER INCOME (EXPENSE) |
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Other expense, net |
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Interest expense |
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| ( | ) |
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Interest income |
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Non-cash interest expense |
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Gain on equity investments, net |
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Gain on extinguishment of debt |
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Change in fair value of derivative liability |
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Foreign currency transaction, net |
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| ( | ) |
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TOTAL OTHER EXPENSE, NET |
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LOSS BEFORE INCOME TAXES |
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INCOME TAXES |
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| ( | ) |
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NET LOSS |
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| ( | ) |
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Deemed dividend on issuance of warrants |
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Deemed dividend on downround of warrants |
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Deemed dividend on warrant exchange |
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Deemed dividend on downround of preferred stock |
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Deemed dividend on preferred stock |
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NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |
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OTHER COMPREHENSIVE LOSS |
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Foreign currency translation adjustment, net |
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| ( | ) |
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TOTAL COMPREHENSIVE LOSS |
| $ | ( | ) |
| $ | ( | ) |
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BASIC NET LOSS PER SHARE |
| $ | ( | ) |
| $ | ( | ) |
DILUTED NET LOSS PER SHARE |
| $ | ( | ) |
| $ | ( | ) |
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
COSMOS HEALTH INC. | ||||||||||||||||||||||||||||||||||||||||||||
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND MEZZANINE EQUITY | ||||||||||||||||||||||||||||||||||||||||||||
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| Accumulated |
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| Other |
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| Total |
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| Preferred Stock |
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| Common Stock |
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| Additional |
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| Treasury Stock |
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| Comprehensive |
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| No. of Shares |
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| Value |
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| No. of Shares |
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| Value |
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| Paid-in Capital |
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| Subscription Receivable |
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| No. of Shares |
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| Value |
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| Accumulated Deficit |
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| Income (Loss) |
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Balance at January 1, 2021 |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) | ||||||||
Foreign currency translation adjustment, net |
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| - |
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| - |
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| - |
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Conversions of convertible note payable |
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| - |
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| - |
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Conversion of notes payable into shares of common stock |
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| - |
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| - |
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Conversion of related party debt |
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| - |
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Beneficial conversion feature discount related to convertible notes payable |
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| - |
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| - |
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Forgiveness of related party debt |
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| - |
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Restricted stock issued to a consultant |
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Sale of treasury stock to third party |
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| - |
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| - |
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Cancellation of treasury shares |
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Purchase of treasury stock from third party |
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| - |
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| - |
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Deemed dividend on warrants |
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| - |
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| - |
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| - |
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| ( | ) |
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Net loss |
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| - |
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| - |
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| - |
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| ( | ) |
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Balance at December 31, 2021 |
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| - |
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| $ |
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|
| $ |
|
| $ |
|
|
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| ||||||||
Adjustments for prior periods from adopting ASU 2020-06 |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | ||||||
Foreign currency translation adjustment, net |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||
Issuance of Series A preferred stock, net of issuance costs of $547,700 |
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Conversion of Series A preferred stock |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Sale of common stock |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Sale of warrants bundled with common stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Exercise of warrants |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
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|
|
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|
|
| |||||||||
Conversion of notes payable into shares of common stock |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Conversion of convertible debt |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
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|
|
|
|
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|
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| |||||||||
Cashless exercise of warrants |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| - |
|
|
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|
|
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|
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| ||||||||
Shares issued in lieu of cash |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
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|
|
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| |||||||||
Fair value of warrants issued in lieu of cash |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Deemed dividend upon downround of preferred stock and warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||||||
Deemed dividend on preferred stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||
Deemed dividend on warrant exchange |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
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|
|
| |||||||
Rounding upon reverse stock split of 1 for 25 common shares |
|
| - |
|
|
|
|
|
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|
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|
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|
|
| - |
|
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|
|
|
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| |||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||||||
Balance at December 31, 2022 |
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
|
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||||
|
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|
The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||||||
| F-4 |
COSMOS HEALTH INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
|
|
|
| |||||
|
| Years Ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
|
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| ||
Amortization of right-of-use assets |
|
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| ||
Amortization of debt discounts and accretion of debt |
|
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| ||
Bad debt expense |
|
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| ||
Write-off of investment |
|
|
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| ||
Lease expense |
|
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|
| ||
Interest on finance leases |
|
|
|
|
|
| ||
Stock-based compensation |
|
|
|
|
|
| ||
Deferred income taxes |
|
|
|
|
| ( | ) | |
Gain on extinguishment of debt |
|
| ( | ) |
|
| ( | ) |
Change in fair value of the derivative liability |
|
|
|
|
| ( | ) | |
Gain on net change in fair value of equity investments |
|
| ( | ) |
|
| ( | ) |
Gain on forgiveness of accrued interest |
|
| ( | ) |
|
|
| |
Shares issued in lieu of cash |
|
|
|
|
|
| ||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( | ) |
|
| ( | ) |
Accounts receivable - related party |
|
| ( | ) |
|
|
| |
Inventory |
|
| ( | ) |
|
| ( | ) |
Prepaid expenses and other assets |
|
| ( | ) |
|
| ( | ) |
Prepaid expenses and other current assets - related party |
|
| ( | ) |
|
| ( | ) |
Loan receivable |
|
|
|
|
| ( | ) | |
Loan receivable - related party |
|
| ( | ) |
|
|
| |
Other assets |
|
|
|
|
|
| ||
Accounts payable and accrued expenses |
|
|
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| ||
Accounts payable and accrued expenses - related party |
|
| ( | ) |
|
|
| |
Accrued interest |
|
| ( | ) |
|
|
| |
Lease liabilities |
|
| ( | ) |
|
| ( | ) |
Taxes payable |
|
| ( | ) |
|
|
| |
Other current liabilities |
|
| ( | ) |
|
|
| |
Other liabilities |
|
|
|
|
| ( | ) | |
NET CASH USED IN OPERATING ACTIVITIES |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from loan receivable |
|
|
|
|
|
| ||
Purchase of property and equipment |
|
| ( | ) |
|
| ( | ) |
Sale of fixed assets |
|
|
|
|
|
| ||
Purchase of intangible assets |
|
| ( | ) |
|
| ( | ) |
Purchase of marketable securities |
|
| ( | ) |
|
|
| |
NET CASH USED IN INVESTING ACTIVITIES |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payment of convertible note payable |
|
| ( | ) |
|
| ( | ) |
Proceeds from convertible note payable |
|
|
|
|
|
| ||
Payment of related party note payable |
|
| ( | ) |
|
|
| |
Payment of note payable |
|
| ( | ) |
|
| ( | ) |
Proceeds from note payable |
|
|
|
|
|
| ||
Payment of related party loan |
|
| ( | ) |
|
| ( | ) |
Proceeds from related party loan |
|
|
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|
|
| ||
Payment of loans payable |
|
| ( | ) |
|
|
| |
Proceeds from loans payable |
|
|
|
|
|
| ||
Payment of lines of credit |
|
| ( | ) |
|
| ( | ) |
Proceeds from lines of credit |
|
|
|
|
|
| ||
Proceeds from issuance of Series A Preferred Stock |
|
|
|
|
|
| ||
Proceeds from the issuance of common stock |
|
|
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|
|
| ||
Proceeds from the exercise of warrants |
|
|
|
|
|
| ||
Payments of finance lease liability |
|
| ( | ) |
|
| ( | ) |
Payments of financing fees |
|
| ( | ) |
|
|
| |
Purchase of treasury stock |
|
|
|
|
| ( | ) | |
Proceeds from sale of treasury stock |
|
|
|
|
|
| ||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
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|
| ||
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|
|
Effect of exchange rate changes on cash |
|
|
|
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|
| ||
|
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|
|
NET CHANGE IN CASH |
|
|
|
|
| ( | ) | |
|
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|
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|
|
|
CASH AT BEGINNING OF YEAR |
|
|
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|
|
| ||
CASH AT END OF YEAR |
| $ |
|
| $ |
| ||
|
|
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|
|
Supplemental Disclosure of Cash Flow Information |
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|
|
Cash paid during the year: |
|
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|
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Interest |
| $ |
|
| $ |
| ||
Income tax |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities |
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
Cancellation of treasury shares |
| $ |
|
| $ |
| ||
Discounts related to beneficial conversion features of convertible debentures |
| $ |
|
| $ |
| ||
Conversion of convertible notes payable to common stock |
| $ |
|
| $ |
| ||
Conversion of notes payable to common stock |
| $ |
|
| $ |
| ||
Conversion of loans payable related party to common stock |
| $ |
|
| $ |
| ||
Conversion of derivative liability to additional paid-in capital |
| $ |
|
| $ |
| ||
Deemed dividend on warrants upon conversion of convertible debt |
| $ |
|
| $ |
| ||
Deemed dividend on preferred stock and warrants upon trigger of downround feature |
| $ |
|
| $ |
| ||
Deemed dividend upon cumulative dividend on preferred stock |
| $ |
|
| $ |
| ||
Conversion of Series A preferred stock |
| $ |
|
| $ |
| ||
Conversion of convertible debt |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| F-5 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Cosmos Health Inc. and its subsidiaries (Nasdaq: COSM), (“us”, “we”, Group, or the “Company”) are an international healthcare group headquartered in Chicago, Illinois. The group is engaged in the nutraceuticals sector through its own proprietary lines of products “Sky Premium Life” and “Mediterranation”. The Company is operating in the pharmaceutical sector as well, through the provision of a broad line of branded generics and OTC medications. In addition, the group is involved in the healthcare distribution sector through its subsidiaries in Greece and the UK, serving retail pharmacies and wholesale distributors. The Company is strategically focusing on the research and development (“R&D”) of novel patented nutraceuticals (Intellectual Property) and specialized root extracts as well as on the R&D of proprietary complex generics and innovative OTC products. The Company has developed a global distribution platform and is currently expanding throughout Europe, Asia and North America. The Company has offices and distribution centers in Thessaloniki and Athens, Greece and Harlow, UK.
The Company was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009, and on November 29, 2022, we changed our name to Cosmos Health Inc. Through its acquisition of Amplerissimo Ltd, on September 27, 2013, the Company changed its principal activities into trading of products, providing representation, and provision of consulting services to various sectors. On August 1, 2014, the Company formed SkyPharm S.A., a Greek Company (“SkyPharm”), a subsidiary that focuses on the trading, sourcing and export of nutraceutical and pharmaceutical products. In February 2017, the Company acquired Decahedron Ltd., a UK Company (“Decahedron”) which is a fully licensed second-generation wholesaler specializing in imports and exports of generics and OTC pharmaceutical products within the EEA and distributor of Sky Premium Life nutraceutical products in the UK. On December 19, 2018, the Company acquired Cosmofarm, a pharmaceutical wholesaler specializing in the distribution and export of pharmaceutical products through its extensive pharmacies network.
Going Concern
The Company’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates the continuation of the Company as a going concern. For the year ended December 31, 2022, the Company had revenue of $
The Company’s revenues are not able to sustain its operations, and concerns exist regarding the Company’s ability to meet its obligations as they become due. The Company is subject to a number of risks to those of smaller commercial companies, including dependence on key individuals and products, the difficulties inherent in the development of a commercial market, the need to obtain additional capital, competition from larger companies, and other pharmaceutical and health care companies.
Management evaluated the above conditions which raise substantial doubt about the Company’s ability to continue as a going concern to determine if it can meet its obligations for the subsequent twelve months from the date of this filing. Management considered its ability to access future capital, curtail expenses if needed, expand product lines, and acquire new products. Based on the management’s evaluations, it has devised a plan in order to meet its obligations for the next twelve months.
Management’s plans include expansion of brand name products to the market, expanding the current product portfolio, and evaluating acquisition targets to expand distribution. Furthermore, the Company intends to vertically integrate the supply chain distribution network Finally, the Company plans to access the capital markets further in order to raise additional funds through equity offerings.
Additionally, as of December 31, 2022, the Company's cash reserves amounted to $
It is management’s conclusion that these plans above, collectively, alleviate the conditions that raised substantial doubt about the Company’s ability to continue as a going concern. Therefore, it is determined that no substantial doubt exists about the Company’s ability to continue as a going concern for a period of twelve months from the date of this filing.
| F-6 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP.
Principles of Consolidation
Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, SkyPharm S.A., Decahedron Ltd. and Cosmofarm Ltd. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Effects of COVID-19
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
The Effects of War in the Ukraine
On February 24, 2022, Russian forces launched significant military action against Ukraine. There continues to be sustained conflict and disruption in the region, which is expected to endure for the foreseeable future. We do not conduct any commercial transactions with either Ukraine or Russia and the Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. Such political issues and conflicts could have a material adverse effect on our results of operations and financial condition if they escalate in areas in which we do business. In addition, changes in and adverse actions by governments in foreign markets in which we do business could have a material adverse effect on our results of operations and financial condition.
Foreign Currency Translation and Other Comprehensive Loss
The functional currency of the Company’s subsidiaries is the Euro and British Pound. For financial reporting purposes, both the Euro (“EUR”) and British Pound (“GBP”) have been translated into United States dollars ($) and/or (“USD”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss)”. Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive loss as other comprehensive loss. There have been no significant fluctuations in the exchange rate for the conversion of EUR or GBP to USD after the balance sheet date.
| F-7 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.
As of December 31, 2022 and 2021, the exchange rates used to translate amounts in Euros into USD and British Pounds into USD for the purposes of preparing the consolidated financial statements were as follows:
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Exchange rate on balance sheet dates |
|
|
|
|
|
| ||
EUR: USD exchange rate |
|
|
|
|
|
| ||
GBP: USD exchange rate |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Average exchange rate for the period |
|
|
|
|
|
|
|
|
EUR: USD exchange rate |
|
|
|
|
|
| ||
GBP: USD exchange rate |
|
|
|
|
|
| ||
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2022 and December 31, 2021, there were no cash equivalents.
The Company maintains bank accounts in the United States denominated in U.S. Dollars, in Greece denominated in Euros, U.S. Dollars and Great Britain Pounds (British Pounds Sterling), and in Bulgaria denominated in Euros. The Company also maintains bank accounts in the United Kingdom, denominated in Euros and Great Britain Pounds (British Pounds Sterling). As of December 31, 2022 and 2021, the aggregate amount in these foreign accounts were $
Reclassifications to Prior Period Financial Statements and Adjustments
Certain reclassifications have been made in the Company’s financial statements of the prior period to conform to the current year presentation. As of December 31, 2021, $
Accounts Receivable, net
Accounts receivable are stated at their net realizable value. The allowance for doubtful accounts against gross accounts receivable reflects the best estimate of probable losses inherent in the receivables’ portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. As of December 31, 2022 and 2021, the Company’s allowance for doubtful accounts was $
| F-8 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Tax Receivables
The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of its business in most of the countries in which it operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, this creates a VAT payable to the government. If the input VAT exceeds the output VAT, this creates a VAT receivable from the government. The VAT tax return is filed on a monthly basis offsetting the payables against the receivables. In observance of EU regulations for intra-EU cross-border sales, our subsidiaries in Greece, SkyPharm and Cosmofarm, do not charge VAT for sales to wholesale drug distributors registered in other European Union member states. As of December 31, 2022 and 2021, the Company had a VAT net receivable balance of $
Inventory
Inventory is stated at the lower-of-cost or net realizable value using the weighted average FIFO method. Inventory consists primarily of finished goods and packaging materials, i.e., packaged pharmaceutical products and the wrappers and containers they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain the optimum stock on hand available for immediate shipment.
The Company writes down inventories to net realizable value based on physical condition, expiration date, current market conditions, as well as forecasted demand. The Company’s inventories are not highly susceptible to obsolescence. Many of the Company’s inventory items are eligible for return to our suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.
Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated on a straight-line basis over the useful lives (except for leasehold improvements which are depreciated over the lesser of the lease term or the useful life) of the assets as follows:
| Estimated Useful Life | |||
Leasehold improvements and technical works |
| |||
Vehicles |
| |||
Machinery |
| |||
Furniture, fixtures and equipment |
|
| ||
Computers and software |
| |||
Depreciation expense was $
Impairment of Long-Lived Assets
In accordance with ASC 360-10, Long-lived Assets, property and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. For the years ended December 31, 2022 and 2021, the Company had no impairment of long-lived assets.
| F-9 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Goodwill and Intangibles, net
The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. First, under step 0, we determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. Following, if step 0 fails, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.
On December 19, 2018, as a result of the acquisition of Cosmofarm, the Company recorded $
Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 5 years for an import/export license, included in Note 4 as license. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. As of December 31, 2022, no revision to the remaining amortization period of the intangible assets was made.
Amortization expense was $
Equity Method Investment
For those investments in common stock or in-substance common stock in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, the investment is accounted for under the equity method. The Company records its share in the earnings of the investee and is included in “Equity earnings of affiliate” in the consolidated statement of operations. The Company assesses its investment for other-than-temporary impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable and recognizes an impairment loss to adjust the investment to its then current fair value.
Investments in Equity Securities
Investments in equity securities are accounted for at fair value with changes in fair value recognized in net income (loss). Equity securities are classified as short-term or long-term based on the nature of the securities and their availability to meet current operating requirements. Equity securities that are readily available for sale in current operations are reported as a component of current assets in the accompanying consolidated balance sheets. Equity securities that are not considered available for use in current operations would be reported as a component of long-term assets in the accompanying consolidated balance sheets. For equity securities with no readily determinable fair value, the Company elects a measurement alternative to fair value. Under this alternative, the Company measures the investments at cost, less any impairment, and adjusted for changes resulting from observable price changes in transactions for identical or similar investments of the investee. The election to use the measurement alternative is made for each eligible investment.
| F-10 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
As of December 31, 2022, investments consisted of (i)
Fair Value Measurement
The Company applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
The following table presents assets that are measured and recognized at fair value as of December 31, 2022 and 2021, on a recurring basis:
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| December 31, 2022 |
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| Total Carrying |
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Marketable securities – ICC International Cannabis Corp. |
| $ |
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Marketable securities – National Bank of Greece |
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| December 31, 2021 |
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Marketable securities – ICC International Cannabis Corp. |
| $ |
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Marketable securities – National Bank of Greece |
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In addition, ASC 825-10-25, Fair Value Option, (“ASC 825-10-25”), expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.
| F-11 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Derivative Instruments
Derivative financial instruments are recorded in the accompanying consolidated balance sheets at fair value in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated statements of operations.
Customer Advances
The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s products. The Company records these receipts as current liabilities until it has met all the criteria for recognition of revenue including passing control of the products to its customer, at such point, the Company will reduce the customer advances balance and credit the Company’s revenues.
Revenue Recognition
In accordance with ASC 606, Revenue from Contracts with Customers, the Company uses a five-step model for recognizing revenue by applying the following steps: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the performance obligations are satisfied by transferring the promised goods to the customer. Once these steps are met, revenue is recognized upon transfer of the product to the customer.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”) and Staff Accounting Bulletin No. 107 (“SAB 107”) regarding its interpretation of ASC 718. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The Company values any employee or non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASU 2018-07, “Compensation-Stock Compensation-Improvements to Nonemployee Share-Based Payment Accounting.”
Foreign Currency Translations and Transactions
Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and amounts included in the accompanying statements of operations and comprehensive loss are translated at the average rates of exchange for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity (deficit) until the entity is sold or substantially liquidated.
| F-12 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Gains or Losses from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency) are included in other income (expense) in the consolidated statements of operations and comprehensive loss.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and accounts receivable.
The following tables show the number of the Company’s clients which contributed 10% or more of revenue and accounts receivable, respectively:
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| Year Ended December 31, |
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Number of 10% clients |
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Percentage of total revenue |
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Percentage of total AR |
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Income Taxes
The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes ASC 740. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is liable for income taxes in Greece and the United Kingdom The corporate income tax rate is
We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets. At December 31, 2022, we believe our United Kingdom and Greece deferred tax assets will not be realized, as such, we recorded a $
Retirement and Termination Benefits
Under Greek labor law, employees are entitled to lump-sum compensation in the event of termination or retirement. The amount depends on the employee’s work experience and renumeration as of the day of termination or retirement. If an employee remains with the company until full-benefit retirement, the employee is entitled to a lump-sum equal to 40% of the compensation to be received if the employee were to be dismissed on the same day. The Company periodically reviews the uncertainties and judgments related to the application of the relevant labor law regulations to determine retirement and termination benefits obligations of its Greek subsidiaries. The Company has evaluated the impact of these regulations and has identified a potential retirement and termination benefits liability. The amount of the liability as of December 31, 2022 and December 31, 2021 was $
| F-13 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Basic and Diluted Net Loss per Common Share
Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method. In accordance with ASC 260, Earnings Per Share, the following table reconciles basic shares outstanding to fully diluted shares outstanding.
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| Years Ended December 31, |
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| 2021 |
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Weighted average number of common shares outstanding Basic |
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Potentially dilutive common stock equivalents |
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| - |
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| - |
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Weighted average number of common and equivalent shares outstanding – Diluted |
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Common stock equivalents are included in the diluted income per share calculation only when option exercise prices are lower than the average market price of the common shares for the period presented.
Accounting Standard Adopted
The Company has adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), effective as of January 1, 2022, using the modified retrospective transition method which, among other things, simplifies the accounting for convertible instruments by eliminating the requirement to separate conversion features from the host contract. Consequently, a convertible debt instrument is accounted for as a single liability measured at its amortized cost and interest expense will be recognized at the coupon rate. The adoption resulted in the elimination of the debt discount that had been recorded within equity (see Note 11, “Convertible Debt”).
In May 2021, the FASB issued ASU 2021-04—Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company adopted ASU 2021-04 on January 1, 2022. The adoption did not have a material impact on its consolidated financial statements.
Correction of an Immaterial Error
During the three-month period ended June 30, 2022, the Company concluded it should have adopted ASU 2020-06 on January 1, 2022. The Company retrospectively adopted ASU 2020-06 as of January 1, 2022 in its Form 10-Q for the period ended June 30, 2022 with a cumulative catch-up adjustment. The net impact of the adjustments was recorded as a reduction to the January 1, 2022 balance of additional paid-in capital in the amount of $
| F-14 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Recent Accounting Pronouncements
In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2022-06, Deferral of the Sunset Date of Reference Rate Reform (Topic 848). Topic 848 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The ASU is effective as of December 21, 2022 through December 31, 2024. We continue to evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. We adopted ASU 2022-06 during 2022. The ASU has not and is currently not expected to have a material impact on the Companies consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures. This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which was adopted on January 1, 2020. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements. ASU 2022-02 also enhances the disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, the ASU amends the guidance on vintage disclosures to require entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. The ASU is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU would be applied prospectively. Early adoption is also permitted, including adoption in an interim period. This ASU is currently not expected to have a material impact on the Company’s consolidated financial statements.
October 2021, the FASB issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The new guidance creates an exception to the general recognition and measurement principles of ASC 805, Business Combinations. The new guidance should be applied prospectively and is effective for all public business entities for fiscal years beginning after December 15, 2022 and include interim periods. The guidance is effective for all other entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of ASU No. 2021-08 on its consolidated financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
NOTE 3 –MARKETABLE SECURITIES
Distribution and Equity Agreement
On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of cannabis, cannabidiol (CBD) and/or any cannabis extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.
| F-15 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
The Distribution and Equity Acquisition Agreement is to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined) product pricing and Marathon has not become profitable within five (
Marathon is an entity with no assets and no activity, the Company attributed no value to the
On March 20, 2023, the Company’s Legal counsel provided notice to Marathon Global Inc, that Cosmos terminated the Equity agreement dated on March 19, 2018 pursuant to Section 3.2 and that termination is effective thirty days from the date of the letter.
Share Exchange Agreements
On May 17, 2018, the Company entered into a Share Exchange Agreement (the “SEA”) with Marathon, ICC International Cannabis Corp (“ICC”) formerly known as Kaneh Bosm Biotechnology Inc. (“KBB”) and certain other sellers of Marathon capital stock. Under the SEA, the Company transferred
On July 16, 2018, the Company completed a Share Exchange Agreement (the “New SEA”) with Marathon, ICC, and certain other sellers of Marathon capital stock whereby the Company transferred its remaining one-half interest (
The Company determined the fair value of both exchanges based on an actively quoted stock price of ICC received in exchange for the Marathon shares. The Company continues to fair value its investment in ICC with changes recognized in earnings each period and was recorded as an unrealized gain on exchange of investment during the year ended December 31, 2022 of $0. The value of the investments as of December 31, 2022 and December 31, 2021, was $
| F-16 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
As of December 31, 2021, in addition to the
As of December 31, 2022, in addition to the
CosmoFarmacy LP
In September 2019, the Company entered into an agreement with an unaffiliated third party to incorporate CosmoFarmacy L.P. for the purpose of providing strategic management consulting services and the retail trade of pharmaceutical products, and OTC to pharmacies. CosmoFarmacy was incorporated with a 30-year term through May 31, 2049. The unaffiliated third party is the general partner (the “GP”) of the limited partnership and is responsible for management and decision-making associated with CosmoFarmacy. The initial share capital was set to EUR
NOTE 4 – PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following at December 31,:
|
| 2022 |
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| 2021 |
| ||
Leasehold improvements and technical works |
| $ |
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| $ |
| ||
Vehicles |
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Furniture, fixtures and equipment |
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Computers and software |
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Less: Accumulated depreciation and amortization |
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| ( | ) |
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| ( | ) |
Total |
| $ |
|
| $ |
| ||
NOTE 5 – GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible, net assets consist of the following at December 31,:
|
| 2022 |
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| 2021 |
| ||
License |
| $ |
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| $ |
| ||
Trade name /mark |
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Customer base |
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Less: Accumulated amortization |
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| ( | ) |
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| ( | ) |
Subtotal |
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Goodwill |
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Total |
| $ |
|
| $ |
| ||
At December 31, 2022, the estimated aggregate amortization expense for intangible assets subject to amortization for each of the five succeeding fiscal years is as follows:
| ||||
Year |
| Amount |
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2023 |
| $ |
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2024 |
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2025 |
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2026 |
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2027 |
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Thereafter |
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| |
Sum |
| $ |
| |
| F-17 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
NOTE 6 – LOAN RECEIVABLE
On October 30, 2021, the Company entered into an agreement for a ten-year loan with Medihelm SA to memorialize €4,284,521 ($
NOTE 7 – CAPITAL STRUCTURE
Preferred Stock
The Company is authorized to issue
Major Rights & Preferences of Series A Preferred Stock
On and effective October 4, 2021, the Company amended and restated its articles of incorporation (the “Amended and Restated Articles”) and filed a certificate of designation (the “COD”) for its Series A Preferred Stock (the “Series A Preferred Stock”) with the State of Nevada. The Amended and Restated Articles allow the Company’s Board of Directors the authority to authorize the issuance of preferred stock from time to time in one or more classes or series by resolution. On February 23, 2022, the Company filed Correction No. 1 to the COD. On July 28, 2022, the Company filed an Amendment to the COD with the State of Nevada to allow a holder to waive application of the Beneficial Ownership Limitation with respect to the conversion of Series A Preferred Stock.
With respect to payment of dividends and distribution of assets upon liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, all shares of the Series A Preferred Stock will rank: (i) senior to all of the Company’s Common Stock and any other equity securities that the Company may issue in the future, (ii) equal to any other equity securities that the Company may issue in the future, the terms of which specifically provide that such equity securities are on parity or senior to the Series A Preferred Stock (“Parity Securities”), (iii) junior to all other equity securities the Company issues, the terms of which specifically provide that such equity securities rank senior to the Series A Preferred Stock, and (iv) junior to all of the Company’s existing and future indebtedness; without the prior written consent of the Majority Holders.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “Liquidation”), the Holders of shares of Series A Preferred Stock shall be first entitled to receive out of the assets of the Company available for distribution to its shareholders.
Each Holder shall not be entitled to vote with holders of outstanding shares of Common Stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Company for their action or consideration, except as provided by law or as set forth in the COD. The holders of Series A Preferred Stock are entitled to receive dividends paid and distributions made to the holders of Common Stock to the same extent as if the holders of Series A Preferred Stock had converted such shares into shares of Common Stock.
The
Each holder is entitled to receive dividends in shares of Series A Preferred Stock or cash determined based on the stated value of each Series A Preferred Stock at the dividend rate of
| F-18 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
On February 28, 2022, the Company entered into a securities purchase agreement, or the Purchase Agreement, with certain investors and an insider for a private placement of the Company’s securities (the “Private Placement”).
The Private Placement consisted of the sale of
The closing of the Private Placement occurred on February 28, 2022. As a condition to the closing of the sale, the Company’s common stock received conditional approval for listing and trading on the Nasdaq Capital Market and commenced trading on February 28, 2022, under the trading symbol, COSM. Concurrent with the issuance of the Series A Shares, the Company executed a registration rights agreement (the “Registration Rights Agreement”) to register the resale of the shares of common stock issuable upon conversion of the Series A Shares and the shares of common stock issuable upon exercise of the warrants issued in connection with the Series A Shares. The Company was required to file its initial registration statement within 45 days following February 28, 2022. The Effectiveness Date was required to be 60 days after February 28, 2022, or 75 days following the SEC’s full review, and any additional registration statements that may be required are to be filed within 20 days following the date required by the SEC. If the Company fails to timely file its initial registration statement, or any additional registration statement, or otherwise comply with the requirements of the Registration Rights Agreement, the Company shall pay each holder 2% of the subscription amount in cash until cured, with an additional penalty of 18% if the cash payment is not made within seven days of the cash payable date.
The Company filed its initial registration statement on May 25, 2022, and thus accrued for liquidated damages payable to the Holders in the amount of $
The Series A Shares rank senior to all of the Company’s Common Stock and any other equity securities that the Company may issue in the future with respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up. While the Series A Shares are outstanding, the Company may not amend, alter or change adversely the powers, preferences or rights given to the Series A Shares, create, or authorize the creation of, any additional class or series of capital stock of the Company (or any security convertible into or exercisable for any class or series of capital stock of the Company), including any class or series of capital stock of the Company that ranks superior to or in parity with the Series A Shares, alter, amend, modify, or repeal its Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Shares, increase or decrease the number of authorized shares of Series A Shares, any agreement, commitment or transaction that would result in a Change of Control, any sale or disposition of any material assets outside of the ordinary course of business of the Company, any material change in the principal business of the Company, including the entry into any new line of business or exit of any current line of business, and circumvent a right or preference of the Series A Shares. Any holder of the Series A Shares shall have the right by written election to the Company to convert all or any portion of the outstanding Series A Shares. Immediately upon effectiveness of a registration statement registering for resale all of the Registrable Securities (as defined in the Registration Rights Agreement), all outstanding Series A Shares shall automatically convert into Common Stock, subject to certain beneficial ownership limitations.
| F-19 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Mezzanine Equity
The Series A Shares are recorded as mezzanine equity in accordance with ASC 480 at its initial net carrying value in the amount of $
As of December 31, 2022,
Common Stock
The Company is authorized to issue 300 million shares of common stock. As of December 31, 2022 and 2021, the Company had
Sale of Treasury Shares
On February 5, 2021, the Company entered into a Stock Purchase Agreement (the “February SPA”) with an unaffiliated third-party. With the February SPA the Company proceeded to sell
Cancellation of Treasury Shares
On September 15, 2021, the Company cancelled
Purchase of Treasury Shares
On December 29, 2021, the Company entered into a Stock Purchase Agreement (the “December SPA”) with a shareholder. With the December SPA provides for the Company proceeded to the purchase of
Reverse split
On December 15, 2022
Consulting Agreement
The Company entered into a Consulting Agreement (the “Agreement”) effective as of February 5, 2021, with a non-affiliated consultant (the “Consultant”). The Company engaged the Consultant to perform consulting services relating to Company management, debt structure, business plans and business development in connection with any capitalization transactions involving the Company and any newly created or existing entities. The Agreement is for a term of nine (9) months with an initial term of ninety (90) days (the “Initial Term”). The Agreement is terminable by the Company for any reason upon written notice at any time after the Initial Term.
| F-20 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
The Company agreed to pay Consultant and its assignees an aggregate of
Debt Exchange Agreements
As of February 5, 2021, The Company entered into an Amended and Restated Debt Exchange Agreement (the “Agreement”) with the “Lender that provided for the issuance by the Company of
On June 23, 2021, the Company entered into a Debt Exchange Agreement (the “June Debt Exchange Agreement”) to exchange various loans with Grigorios Siokas (see Note 9), in the aggregate principal amount of $
On July 13, 2021, the Company entered into a Debt Exchange Agreement (the “July 13 Agreement”) with Grigorios Siokas, the Company’s Chief Executive Officer (See Note 9). The July 13 Agreement provided for the issuance by the Company of
On July 19, 2021, the Company entered into a Debt Exchange Agreement (the “July 19 Agreement”) with Grigorios Siokas, the Company’s Chief Executive Officer (See Note 9). The July 19 Agreement provided for the issuance by the Company of
On August 4, 2021, the Company entered into a Debt Exchange Agreement (the “August 4 Agreement”) with a senior institutional lender (the “Lender”), SkyPharm S.A., a wholly-owned Greek subsidiary of the Company, and Grigorios Siokas, the Company’s Chief Executive Officer, as Guarantor. The parties to the Agreement had entered into a senior loan, as amended, as of June 30, 2020 (the “Loan”) pursuant to which the Loan had been reduced to EUR 2,700,000 ($3,302,100) (the “Debt”). The August 4 Agreement provides for the issuance by the Company of
| F-21 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
On December 8, 2021, the Company entered into a Debt Exchange Agreement (the “December 8 Agreement”) with the Company’s Chief Executive Officer (See Note 9). The December 8 Agreement provided for the issuance by the Company of
Debt Conversions
During the year ended December 31, 2022, the Company issued
On May 1, 2022, the Company issued
During the year ended December 31, 2021, the Company issued
Exercise of Warrants
During the year ended December 31, 2022, the Company issued
During the year ended December 31, 2022, the Company issued
Issuance of Common Stock and Warrants
On May 25, 2022, the Company granted
| F-22 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
On June 7, 2022, the Company issued
On July 14, 2022, the Company issued
On October 20, 2022, the Company issued
On October 20, 2022 the Company cancelled
On November 21, 2022, the Company entered into a settlement and general release pursuant to a letter agreement dated July 7, 2021 whereby a consultant claimed to be entitled to compensation with respect to a previous financing. As a result of the settlement, the Company issued
On December 19, 2022, the Company issued
No options warrants or other potentially dilutive securities other than those disclosed above have been issued as of December 31, 2022.
| F-23 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
NOTE 8 – INCOME TAXES
The Company provides for income taxes using an asset and liability approach under which deferred income taxes are provided for based upon enacted tax laws and rates applicable to periods in which the taxes become payable.
The domestic and foreign components of income (loss) before (benefit from) provision for income taxes were as follows:
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Domestic |
| $ | ( | ) |
| $ | ( | ) |
Foreign |
|
| ( | ) |
|
|
| |
|
| $ | ( | ) |
| $ | ( | ) |
The components of the (benefit from) provision for income taxes are as follows:
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Current tax provision |
|
|
|
|
|
| ||
Federal |
| $ |
|
| $ |
| ||
State |
|
|
|
|
|
| ||
Foreign |
|
| ( | ) |
|
|
| |
Total current tax provision |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
|
|
|
|
Deferred tax provision |
|
|
|
|
|
|
|
|
Domestic |
| $ |
|
| $ |
| ||
State |
|
|
|
|
|
| ||
Foreign |
|
|
|
|
| ( | ) | |
Total deferred tax provision |
| $ |
|
| $ | ( | ) | |
|
|
|
|
|
|
|
|
|
Total current provision |
| $ |
|
| $ |
| ||
The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2022 and 2021 is as follows:
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
US |
|
|
|
|
|
| ||
Loss before income taxes |
| $ | ( | ) |
| $ | ( | ) |
Taxes under statutory US tax rates |
| $ | ( | ) |
| $ | ( | ) |
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
Increase in valuation allowance |
| $ |
|
| $ |
| ||
Foreign tax rate differential |
| $ |
|
| $ | ( | ) | |
Permanent differences |
| $ |
|
| $ | ( | ) | |
US tax on foreign income |
| $ |
|
| $ |
| ||
163(j)catchup |
|
|
|
|
| ( | ) | |
Prior period adjustments |
| $ | ( | ) |
| $ |
| |
State taxes |
| $ | ( | ) |
| $ | ( | ) |
Income tax expense |
| $ |
|
| $ |
| ||
Companies subject to the Global Intangible Low-Taxed Income provision (GILTI) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI. We have elected to account for GILTI as a period cost.
| F-24 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
Net operating loss carryforward |
| $ |
|
| $ |
| ||
Capital loss carryforward |
|
|
|
|
|
| ||
Section 163(j) carryforward |
|
|
|
|
|
| ||
Nonqualified stock options |
|
|
|
|
|
| ||
Foreign exchange |
|
|
|
|
|
| ||
Allowance for doubtful accounts |
|
|
|
|
|
| ||
Accrued expenses |
|
|
|
|
|
| ||
Mark to market adjustment in securities |
|
|
|
|
|
| ||
Lease liability |
|
|
|
|
|
| ||
Gain on extinguishment of debt |
|
|
|
|
|
| ||
Depreciation |
|
| ( | ) |
|
| ( | ) |
Total deferred tax assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Intangibles |
|
| ( | ) |
|
| ( | ) |
Inventory |
|
| ( | ) |
|
| ( | ) |
Right of use asset |
|
| ( | ) |
|
| ( | ) |
Goodwill |
|
| ( | ) |
|
| ( | ) |
Total deferred tax liabilities |
|
| ( | ) |
|
| ( | ) |
Valuation allowance |
|
| ( | ) |
|
| ( | ) |
Net deferred tax assets |
| $ |
|
| $ |
| ||
At December 31, 2022, the Company had U.S. net operating loss (“NOL”) carryforwards of approximately $
ASC 740 requires that the tax benefit of net operating losses (“NOLs”), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s history of domestic operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance, on all our deferred tax asset. In 2020, foreign (Greece and United Kingdom) valuation allowances were released, aggregating $
The Company applied the “more-likely-than-not” recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2022 and December 31, 2021, respectively. We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.
The Company files income tax returns in Illinois, United States, and in foreign jurisdictions including Greece, and United Kingdom. As of December 31, 2022, all domestic tax years are open to tax authority examination due the availability of net operating loss deductions, 2010 through 2022. In Greece, the statute of limitations is open for five years, 2017 through 2022. In United Kingdom, the statute of limitations is open for four years, 2018 through 2022. Currently, there are no ongoing tax authority income tax examinations.
| F-25 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
NOTE 9 – RELATED PARTY TRANSACTIONS
Doc Pharma S.A.
As of December 31, 2022, the Company has a prepaid balance of $
During the years ended December 31, 2022 and 2021, the Company purchased a total of $
On October 10, 2020, the Company entered into a contract manufacturer outsourcing (“CMO”) agreement with Doc Pharma whereby Doc Pharma is responsible for the development and manufacturing of pharmaceutical products and nutritional supplements according to the Company’s specifications based on strict pharmaceutical standards and good manufacturing practice (“GMP”) protocols as the National Organization for Medicines requires. The Company has the exclusive ownership rights for trading and distribution of its own branded nutritional supplements named “Sky Premium Life®”. The duration of the agreement is for
For the years ended December 31, 2022 and 2021, the Company has purchased €1,653,911 ($
On May 17, 2021, Doc Pharma and the Company entered into a Research and Development “R&D” agreement whereby Doc Pharma will be responsible for the research, development, design, registration, copy rights and licenses of 250 nutritional supplements for the final products called Sky Premium Life®. These products will be sold in Greece and abroad. The total cost of this project will be €1,425,000 plus VAT and will be done over three phases as follows:
The balance of prepaid expenses due to SkyPharm SA due Doc Pharma SA as of December 31, 2022, had increased to €7,103,706 ($
| F-26 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma S.A. in the past.
Panagiotis Kozaris
From time-to-time purchases back shares that Panagiotis Kozaris owns and records them as treasury shares. The Company pays Panagiotis Kozaris in advance for the shares owned and obtains the shares upon execution of a cumulative stock-purchase agreement (“SPA”). During 2021 the Company prepaid a total of $
Panagiotis Kozaris is considered a related party due to the fact that he is a former General operational manager and current employee of Cosmofarm SA.
Maria Kozari
During 2021, the Company, through its subsidiary, Cosmofarm SA, commenced a partnership with a pharmacy called “Pharmacy & More”, owned by Maria Kozari. The transactions with the respective pharmacy were in Cosmofarm’s normal course of business, however, a more flexible credit policy was allowed as the pharmacy was new and needed to be established in the market. During the years ended December 31, 2022 and 2021 the Company’s net sales to Pharmacy & More amounted to $
The Company plans to acquire Pharmacy & More within fiscal year 2023, however the acquisition is conditional upon waiver of certain local legal restrictions. Upon acquisition, the Company intends to offset the outstanding receivable balance with the corresponding purchase price.
Maria Kozari is considered a related party to the Company due to the fact that she is the daughter of Panagiotis Kozaris, a former Operational General Manager and current employee of Cosmofarm SA.
Notes Payable – Related Party
A summary of the Company’s related party notes payable during the years ended December 31, 2022 and 2021 is presented below:
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Beginning Balance |
| $ |
|
| $ |
| ||
Payments |
|
| ( | ) |
|
|
| |
Foreign currency translation |
|
|
|
|
| ( | ) | |
Ending Balance |
| $ |
|
| $ |
| ||
Grigorios Siokas
On December 20, 2018, the €1,500,000 ($
Grigorios Siokas is the Company’s CEO and principal shareholder.
Dimitrios Goulielmos
On November 21, 2014, the Company entered into an agreement with Dimitrios Goulielmos, as amended on November 4, 2016. Pursuant to the amendment, this loan has no maturity date and is non-interest bearing. As of December 31, 2021, the Company had a principal balance of €10,200 ($
Dimitrios Goulielmos is a former director and CEO of the Company.
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2022, and 2021, the Company recorded a foreign currency translation loss of $
| F-27 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
A summary of the Company’s related party loans payable during the years ended December 31, 2022 and 2021 is presented below:
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ |
|
| $ |
| ||
Proceeds |
|
|
|
|
|
| ||
Payments |
|
| ( | ) |
|
| ( | ) |
Conversion of debt |
|
|
|
|
| ( | ) | |
Settlement of lawsuit |
|
|
|
|
| ( | ) | |
Foreign currency translation |
|
| ( | ) |
|
|
| |
Ending balance |
| $ |
|
| $ |
| ||
Grigorios Siokas
From time to time, Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans.
On May 10, 2021, the Company entered into a Debt Exchange agreement (“May Debt Exchange”) related to a lawsuit from on or about July 25, 2019, whereby Mark Rubenstein, individually and as a shareholder of the Company, brought the action styled Rubenstein v. Siokas, et al., Case No. 1:19-cv-06976-KPF (S.D.N.Y.) against Grigorios Siokas for recovery of alleged profits earned under Section 16(b) of the Securities Exchange Act of 1934. Although recovery was sought only from Mr. Siokas, the Company was also named as a nominal defendant. Both the Company and Mr. Siokas vigorously defended the lawsuit. On or about September, 18, 2020, in an effort to avoid the uncertainty of litigation and further legal expense, Mr. Siokas agreed to settle the lawsuit by agreeing to reimburse the Company a total of $
During the year ended December 31, 2021, the Company entered into various agreements (as defined in Note 7) with
During the year ended December 31, 2021, the Company borrowed additional proceeds of €1,803,000 ($
During the year ended December 31, 2022, the Company borrowed additional proceeds of €656,750 ($
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2022 and 2021, the Company recorded a gain of $
Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.
| F-28 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
NOTE 10 – LINES OF CREDIT
A summary of the Company’s lines of credit as of December 31, 2022, and 2021 is presented below:
|
| December 31, 2022 |
|
| December 31, 2021 |
| ||
National |
| $ |
|
| $ |
| ||
Alpha |
|
|
|
|
|
| ||
Pancreta |
|
|
|
|
|
| ||
EFG |
|
|
|
|
|
| ||
Ending balance |
| $ |
|
| $ |
| ||
The line of credit with National Bank of Greece is renewed annually with current interest rates of 6.00%, 4.35% (“COSME 2” facility) and 4.35% (plus the 6-month Euribor plus any contributions currently in force by law on certain lines of credit), (“COSME 1” facility).
The maximum borrowing allowed for the 6% line of credit was $
The maximum borrowing allowed for the 4.35% lines of credit, was $
The line of credit with Alpha Bank of Greece is renewed annually with a current interest rate of 6.00%. The maximum borrowing allowed was $
The Company entered into a line of credit with Pancreta Bank on February 23, 2021. The line of credit is renewed annually with a current interest rate of 6.10%. The maximum borrowing allowed as of December 31, 2022 and 2021was $
The Company entered into a line of credit with EGF on June 6, 2022. The line of credit is renewed annually with a current interest rate of 4.49%. The maximum borrowing allowed as of December 31, 2022 was $
Under the agreements, the Company is required to maintain certain financial ratios and covenants. These lines of credit were assumed in the Company’s acquisition of Cosmofarm. As of December 31, 2022 and 2021, the Company was in compliance with these ratios and covenants.
The above lines of credit are guaranteed and backed by customer receivable checks and they are not considered to be a direct debt obligation for the Company. They are a type of factoring, where the postponed customer checks are assigned by the Company to the bank, in order to be financed at a pre-agreed rate.
Interest expense for the years ended December 31, 2022 and 2021, was $
NOTE 11 – CONVERTIBLE DEBT
A summary of the Company’s convertible debt during the years ended December 31, 2022 and 2021 is presented below:
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Beginning balance convertible notes |
| $ |
|
| $ |
| ||
New notes |
|
|
|
|
|
| ||
Payments |
|
| ( | ) |
|
| ( | ) |
Conversion to common stock |
|
| ( | ) |
|
| ( | ) |
Subtotal notes |
|
|
|
|
|
| ||
Debt discount at year end |
|
|
|
|
| ( | ) | |
Convertible note payable, net of discount |
| $ |
|
| $ |
| ||
All of the convertible debt is classified as short-term within the consolidated balance sheet as it all matures and will be paid back within fiscal year 2023.
| F-29 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
December 21, 2020 Securities Purchase Agreement
On December 21, 2020 the Company entered into a convertible promissory note with Platinum Point Capital, LLC (the “Holder”, “Lender” or “Platinum”) pursuant to a Securities Purchase Agreement (the “SPA”).
The Company issued the $
During the year ended December 31, 2021, the Company converted an aggregate total of $
On May 1, 2022 the Company issued
The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a derivative liability which is accounted for separately. The Company determined a derivative liability exists and determined that the embedded derivative was valued at $
January 7, 2021 Subscription Agreement
On January 7, 2021 (the “Issue Date”), the Company entered into a subscription agreement with an unaffiliated third party, whereby the Company issued for a purchase price of $
Upon the consummation of a NEO listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 25% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the NEO listing. As a result of a NEO listing not being consummated on or before October 31, 2021, the note holder has the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion. As of December 31, 2022, the Company had a principal balance of $
| F-30 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a derivative liability which is accounted for separately. The Company measured the embedded derivative valued at $
Convertible Promissory Note and Securities Purchase Agreement
On September 17, 2021 (the “Issue Date”), the Company entered into a convertible promissory note and securities purchase agreement with an unaffiliated third party.
Convertible Promissory Note
The Company issued the convertible promissory note for a purchase price of $
Upon the consummation of a Nasdaq listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a
For the year ended December 31, 2022, $
Securities Purchase Agreement
On September 17, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with a third party whereby the Company agree to issue 5,000,000 shares of Series A Preferred Stock at a purchase price of $1.00 per share or $5,000,000 in the aggregate, and a Warrant (the “Warrant”) to purchase 100% of the number of shares of the Company’s Common Stock issuable upon conversion of the Series A Preferred Stock. The Series A Preferred Stock will be convertible into the Company’s Common Stock as determined by multiplying the number of shares of Series A Preferred Stock to be converted by the lower of
The SPA is subject to certain conditions to close. As of December 31, 2021 and the date of this filing, the conditions to close had not been met, the funds have not been transferred, the preferred shares and the warrant was not issued. The SPA automatically terminated on March 31, 2022.
| F-31 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
The table below provides a summary of the changes in fair value, including net transfers in and/or out of all financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2022 and 2021:
|
| Amount |
| |
Balance on January 1, 2021 |
| $ |
| |
Issuances to debt discount |
|
|
| |
Reduction of derivative related to conversions |
|
| ( | ) |
Change in fair value of derivative liabilities |
|
| ( | ) |
Balance on December 31, 2021 |
|
|
| |
Issuances to debt discount |
|
|
| |
Reduction of derivative related to conversions |
|
| ( | ) |
Change in fair value of derivative liabilities |
|
|
| |
Balance on December 31, 2022 |
| $ |
| |
The fair value of the derivative conversion features and warrant liabilities as of December 31, 2022 and 2021 were calculated using a Monte-Carlo option model valued with the following assumptions:
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Dividend yield |
|
| % |
|
| % | ||
Expected volatility |
| % |
|
| ||||
Risk free interest rate |
| % |
|
| ||||
Contractual terms (in years) |
|
|
|
| ||||
NOTE 12 – NOTES PAYABLE
A summary of the Company’s third-party debt during the years ended December 31, 2022 and 2021 is presented below:
December 31, 2022 |
| Loan Facility |
|
| Trade Facility |
|
| Third Party |
|
| COVID Loans |
|
| Total |
| |||||
Beginning balance |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Payments |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Conversion of debt |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
Recapitalized upon debt modification |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
Accretion of debt and debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| |||
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Notes payable - long-term |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Notes payable - short-term |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
| F-32 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
December 31, 2021 |
| Loan Facility |
|
| Trade Facility |
|
| Third Party |
|
| COVID Loans |
|
| Total |
| |||||
Beginning balance |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Payments |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Conversion of debt |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||
Recapitalized upon debt modification |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
Debt forgiveness |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Reclassification of Line of Credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Notes payable - long-term |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Notes payable - short-term |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Our outstanding debt as of December 31, 2022 is repayable as follows: | ||||
|
| December 31, 2022 |
| |
2023 |
| $ |
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 and thereafter |
|
|
| |
Total debt |
|
|
| |
Less: notes payable - current portion |
|
| ( | ) |
Notes payable - long term portion |
| $ |
| |
| F-33 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Loan Facility Agreement
On August 4, 2021, the Company entered into an exchange agreement for the existing loan facility agreement with Synthesis Peer-to-Peer Income Fund, whereby the Company agreed to the following:
| • | Issue on August 4, 2021, |
|
|
|
| • | Agreed to issue no more than |
The Company evaluated the August 4, 2021, exchange agreement for debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment because a substantial conversion feature was added to the debt terms. Upon extinguishment, the Company recorded a loss upon extinguishment in the amount of $
The Company incurred non-cash interest expense of $
The debt is subject to acceleration in an Event of Default (as defined in the Notes). This agreement is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of
During Q2 2022, the Company informally agreed with the Lender to extend the maturity of the facility to September 30, 2022. During Q3 2022, the maturity of the facility was further informally extended to December 31, 2022. The Company reassessed and adjusted accordingly the accretion of the debt extinguishment effect described above.
Trade Facility Agreements
On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “TFF”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”) as amended on November 16, 2017, and May 16, 2018.
On October 17, 2018, the Company entered into a further amended agreement with Synthesis whereby the current balance on the TFF as of October 1, 2018, which was €4,866,910 ($
On December 30, 2020, the Company transferred the Euro €
During the year ended December 31, 2021, the Company repaid €50,000 ($
| F-34 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
On March 3, 2022, the Company entered into a modification agreement to extend the maturity date to January 10, 2023 and payments under the $
On January 31, 2023, the Company entered into a Settlement Agreement for the $
Third Party Debt
On November 16, 2015, the Company entered into a Loan Agreement with Panagiotis Drakopoulos, former Director and former Chief Executive Officer, pursuant to which the Company borrowed €40,000 ($
Conversion of Senior Promissory Notes
In the year ending December 31, 2019, the Company executed Senior Promissory Notes (the “Debt”) in an aggregate total of $
All accrued and unpaid interest, $
May 18, 2020, July 3, 2020, and August 4, 2020 Senior Promissory Notes
May 18, 2020 Senior Promissory Note
On May 18, 2020, the Company executed a Senior Promissory Note (the “May 18 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender.
The May 18 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 18 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2021 the Company had a principal balance of $2,000,000 on this note, which was classified as Notes payable long-term portion on the consolidated balance sheet. This note was modified during fiscal year 2022, see further discussion below.
| F-35 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
July 3, 2020 Senior Promissory Note
On July 3, 2020, the Company executed a Senior Promissory Note (the “July 3 Note”) in the principal amount of $
The July 3 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July 3 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.
The Company used the proceeds from the July 3 Note to repay the principal outstanding on the May 18 Note ($
As of December 31, 2021, the Company had accrued an aggregate total of $
August 4, 2020 Senior Promissory Note
On August 4, 2020, the Company executed a Senior Promissory Note (the “August 4 Note”) in the principal amount of $
The August 4 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the August 4 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.
On October 29, 2020, the Company entered into a debt exchange agreement with the lender whereby the Company issued
Modification of May 18, 2020, July 3, 2020, and August 4, 2020 Senior Promissory Notes
On February 23, 2022, the Company entered into modification agreements to extend the due dates of the May 18 Note, July 3 Note, and August 4 Note to June 30, 2023 of $
November 19, 2020 Debt Agreement
On November 19, 2020, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($
| F-36 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
July 30, 2021 Debt Agreement
On July 30, 2021, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($
June 9, 2022 Debt Agreement
On June 9, 2022 the
August 29, 2022 Promissory Note
On August 29, 2022,
COVID-19 Government Loans
On May 12, 2020, the Company’s subsidiary, SkyPharm, was granted and on May 22, 2020 the Company received a €300,000 ($
On June 23, 2020, the Company’s subsidiary, Cosmofarm, entered into an agreement with the “National Bank of Greece SA” (the “Bank”) to borrow a maximum of €500,000 ($
| F-37 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
On June 24, 2020, the Company received a loan £50,000 ($68,310) from the United Kingdom government. The loan has a ten-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time. The Company repaid £2,335 ($
Distribution and Equity Agreement
As discussed in Note 3 above, the Company entered into a Distribution and Equity Acquisition Agreement with Marathon. The Company was appointed the exclusive distributor of the Products (as defined) initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. As consideration for its services, Company received: (a)
As discussed in Note 3, the Company attributed no value to the shares received in Marathon pursuant to (a) above. In relation to the
On March 20, 2023, the Company’s Legal counsel provided notice to Marathon Global Inc, that Cosmos terminated the Equity agreement dated on March 19, 2018 pursuant to Section 3.2 and that termination is effective thirty days from the date of the letter.
None of the above loans were made by any related parties.
NOTE 13 – LEASES
The assets and liabilities from operating and finance leases are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate, which is determined using the interest rate of our long-term debt on the date of inception.
| F-38 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
The Company’s weighted-average remaining lease term relating to its operating leases is
The Company incurred lease expense for its operating leases of $
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2022:
Maturity of Lease Liability |
|
|
| |
2023 |
| $ |
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 and thereafter |
|
|
| |
Total undiscounted operating lease payments |
| $ |
| |
Less: Imputed interest |
|
| ( | ) |
Present value of operating lease liabilities |
| $ |
| |
The Company’s weighted-average remaining lease term relating to its finance leases is
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s finance leases as of December 31, 2022:
Maturity of Lease Liability |
|
|
| |
2023 |
| $ |
| |
2024 |
|
|
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 and thereafter |
|
|
| |
Total undiscounted finance lease payments |
| $ |
| |
Less: Imputed interest |
|
| ( | ) |
Present value of finance lease liabilities |
| $ |
| |
The Company had financing cash flows used in finances leases of $
The Company incurred interest expense on its finance leases of $
| F-39 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company may be involved in litigation relating to claims arising out of the Company’s operations in the normal course of business. As of December 31, 2022, the following litigations were pending. None of the below is expected to have a material financial or operational impact.
Solgar Inc. sued SkyPharm SA for product homogeneity regarding the nutraceutical line “Sky Premium Life”. As a result, Solgar requested the prohibition for SkyPharm to manufacture, import and sell, market or in any way possess and distribute, including Internet sales and advertise in any way in the Greek market of “Sky Premium Life” due to homogeneity with Solgar’s products. Lawsuit with data no 4545/2021 of the company “Solgar Inc.” against SkyPharm before the Court of First Instance of Thessaloniki, according to which Solgar Inc. requests to prohibit SkyPharm SA’s use of the nutraceutical line “Sky Premium Life” packages as its characteristics are similar to Solgar Inc.’s and is also seeking the withdrawal of existing ones from the market. Solgar Inc. has further requested to be awarded compensation for non-pecuniary damage amounting to €20,000 (financial obligation). The case was heard on January 28, 2022, and the decision numbered 8842/2022 of the court of Thessaloniki was issued, which, accepted our claims and dismissed the Solgar’s I.N.C. lawsuit.
Compilation and submission of a memorandum against the National Medicines Agency with no. 127351/16.12.2021 document. On July 22, 2015, the National Medicines Agency approved the license of wholesale sale of pharmaceutical products of the pharmaceutical company under the name SkyPharm SA with set validity at five years and an expiration date of July 22, 2020. Subsequently, SkyPharm SA on June 15, 2020, legally and timely submitted the application for renewal of the wholesale license of pharmaceutical products to the National Medicines Agency even though the period under review is characterized by the COVID – 19 pandemic The National Medicines Agency did not respond, therefore the Company asked from the lawyer to immediately ask for the decision of the renewal. Two months after the filing of no. 3459 / 15.01.2021 letter of the attorney and almost nine months after the no. 627615.06.2020 company application for the renewal and the National Medicines Agency replied by rejecting the renewal request on March 9, 2021 (ref. 62769 / 20-25.02.2021). In addition, document No. 127351-16.12.2021 of EOF to SkyPharm states that after an inspection of EOF at the premises of the company “Doc Pharma”, SkyPharm did not have a wholesale license in force in violation of article 106 par. 1b and par. 1c of the ministerial decision D.YG3a / GP.32221 / 29-4-2019 and issued invoices dated February 26, 2021 and March 8, 2021). The National Medicines Agency has not yet replied to the renewal request.
Order for payment by the court which derived from a fine related to tax audit that concerns financial year 2014. The ruling with no. 483/16.12.2020 was against Cosmofarm SA. The defendant appealed against the decision by the ruling with no.11541/09.03.2021.This appeal was dismissed due to inactive passage of 120 days. Because of this inactive passage, Cosmofarm appealed against Greek tax authorities, no.6704/29.11.2021. There was an obligation of additional tax and fines imposition of €91,652 that Cosmofarm has already paid and claim back through the appeal (financial claim). As of December 31, 2022, the trial is still pending.
Advisory Agreements
On July 1, 2021, the Company entered into a two-year advisory agreement with a third party (the “Consultant”) for advisory and consulting services related to the Company’s intention to become listed on NASDAQ. Peter Goldstein, a then director of the Company is a principal of the Consultant. As consideration for services rendered, the Company will pay the consultant
On July 7, 2021, the Company entered into an agreement with a non-exclusive financial advisor and placement agent.
| F-40 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
On July 7, 2021, the Company entered into a 6-month agreement with a non-exclusive agent, advisor or underwriter in any offering of securities of the Company. At the closing of any offering the Company will compensate the agent:
On August 25, 2022, the Company signed a 4-month agreement with a consultant for a marketing/media plan and the development of a forward-looking strategy for the Company. The Consultant’s compensation for the above services amounted to $
Research & Development Agreements
On June 26, 2022, the Company signed an R&D agreement with a third party, through which the Company assigns the third party the support of the Research and Development department with the implementation of two projects related to the development of new products and services in the field of health focusing on the human intestinal microbiome. The cost of the project amounts to EUR 820,000 and is allocated to certain phases of the projects. It will be due and payable upon completion of the corresponding phases.
NOTE 15 – EARNINGS PER SHARE
Basic net loss per share is computed by dividing net loss attributable to the Company, decreased with respect to net income or increased with respect to net loss by dividends declared on preferred stock by using the weighted-average number of common shares outstanding. The dilutive effect of incremental common shares potentially issuable under outstanding options, warrants and restricted shares is included in diluted earnings per share in 2022 and 2021 utilizing the treasury stock method. The computations of basic and diluted per share data were as follows:
|
| 2022 |
|
| 2021 |
| ||
Numerator for Basic and Diluted Earnings Per Share: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Denominator for Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
Weighted Average Shares |
|
|
|
|
|
| ||
Potentially Dilutive Common Shares |
|
| - |
|
|
| - |
|
Adjusted Weighted Average Shares |
|
|
|
|
|
| ||
Basic and Diluted Net Loss per Share |
|
| ( | ) |
|
| ( | ) |
| F-41 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
The following table summarized the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2022 and 2021 as such shares would have had an anti-dilutive effect:
|
| 2022 |
|
| 2021 |
| ||
Common Stock Warrants |
|
|
|
|
|
| ||
Common Stock Options |
|
| - |
|
|
|
| |
Convertible Debt |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
| ||
NOTE 16 – STOCK OPTIONS AND WARRANTS
As of December 31, 2022, there were
A summary of the Company’s option activity during the years ended December 31, 2022 and 2021 is presented below:
|
|
|
|
|
| Weighted |
|
|
| |||||||
|
|
|
| Weighted |
|
| Average |
|
|
| ||||||
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| |||||
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
Options |
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
Balance Outstanding, January 1, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| ( | ) |
|
| - |
|
|
| - |
|
|
|
| |
Balance Outstanding, December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| ( | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Balance Outstanding, December 31, 2022 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2022 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ |
| |
Omnibus Equity Incentive Plan
On September 19, 2022 the Company held a Board of Directors meeting, whereas, the Board of Directors had elected to adopt an Omnibus Equity Incentive Plan (the “Plan”), that includes reserving
| F-42 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Warrant Anti-Dilution Adjustment and Deemed Dividend
The Company’s warrants outstanding contain certain anti-dilution adjustments if the Company issues shares of its common stock at a lower price per share than the applicable exercise price of the underlying warrant. If any such dilutive issuance occurs prior to the exercise of such warrant, the exercise price will be adjusted downward to a price equal to the common stock issuance, and the number of warrants that may be purchase upon exercise is increased proportionately so that the aggregate exercise price payable under the warrant shares shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. On December 21, 2021, the Company issued its common stock upon conversion of its convertible debt at an issuance price of $
As of December 31, 2022, there were 4,194,236 warrants outstanding and
A summary of the Company’s warrant activity for the years ending December 31, 2022 and 2021 is as follows:
|
|
|
|
|
| Weighted |
|
|
| |||||||
|
|
|
| Weighted |
|
| Average |
|
|
| ||||||
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| |||||
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
Warrants |
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
Balance Outstanding, January 1, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance Outstanding, December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Granted |
|
|
|
|
|
|
|
|
|
|
| - |
| |||
Forfeited |
|
| ( | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| ( | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance Outstanding, December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
NOTE 17 – DISAGGREGATION OF REVENUE
ASC 606-10-50-5 requires that entities disclose disaggregated revenue information in categories (such as type of good or service, geography, market, type of contract, etc.). ASC 606-10-55-89 explains that the extent to which an entity’s revenue is disaggregated depends on the facts and circumstances that pertain to the entity’s contracts with customers and that some entities may need to use more than one type of category to meet the objective for disaggregating revenue.
| F-43 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
The Company disaggregates revenue by country to depict the nature and economic characteristics affecting revenue. The following table presents our revenue disaggregated by country for the years ended:
Country |
| 2022 |
|
| 2021 |
| ||
Croatia |
| $ |
|
| $ |
| ||
Cyprus |
|
|
|
|
|
| ||
Denmark |
|
|
|
|
|
| ||
Germany |
|
|
|
|
|
| ||
Greece |
|
|
|
|
|
| ||
Italy |
|
|
|
|
|
| ||
UK |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
NOTE 18 – SUBSEQUENT EVENTS
Loan Agreement with Doc Pharma
On January 1, 2023, SkyPharm SA (“the Lender”) signed a loan agreement with Doc Pharma SA (“the Borrower”) for €4,000,000 relating to the prepaid balance the Lender has due from the Borrower. The balance of SkyPharm SA due from DocPharma SA as of December 31, 2022, had increased to EUR 7,103,706 ($
Purchase of Land and Buildings
On January 6, 2023, the Company signed a purchase agreement with a third party to acquire buildings and a lot, in Montreal, Canada, of approximately
Amendment to Distribution Agreement
On January 20, 2023, the Company amended the initial Distribution Agreement dated September 22, 2022 with the first purchase order to market and distribute Virax Biolabs’ (Nasdaq: VRAX) ViraxClear branded COVID-19 and Influenza A+B Antigen Combo Rapid Detection Kits. The Company will have exclusive distribution rights for Greece and Cyprus, with the opportunity to distribute the ViraxClear branded test kits across Europe on a non-exclusive basis.
Settlement Agreement
On January 31, 2023, the Company entered into a Settlement Agreement with a Third-Party Lender for the $
Stock Buyback Program
On January 24, 2023 the Company announced that its Board of Directors has approved a share repurchase program with authorization to purchase up to $
Departure and Appointment of Certain Officers
On February 1, 2023, the Company announced the appointment of Nikos Bardakis, who comes with over two decades of international branded pharmaceutical sector experience, as the Chief Operating Officer (COO). Nikos Bardakis succeeded Pavlos Ignatiades, who assumed the position of Chief Communications Officer (CCO).
Repayment of Convertible Promissory Note
On February 7, 2023 the Company fully repaid the outstanding balance and interest of the January 7, 2021, $
| F-44 |
COSMOS HEALTH INC.
Notes to the Consolidated Financial Statements
December 31, 2022
Acquisition of a Pharmaceutical Company
On March 7, 2023, the Company announced that it has entered into a material definitive agreement with a Greek pharmaceutical company that manufactures, sells, distributes, and markets original branded products researched and developed by leading global pharmaceutical and healthcare companies. This material definitive agreement is pursuant to the Binding Letter of Intent dated July 19, 2022, and amended on January 10, 2023. On February 28, 2023, Cosmos Health injected €4.1 million into this pharmaceutical company, which will allow it to emerge from an entity at a restructuring stage, as an entity with a robust balance sheet and a strong foundation for future growth. The next phase is the execution of a Stock Purchase Agreement to be concluded no later than May 1, 2023.
Acquisition of a Telehealth Company
On March 17, 2023, the Company announced that it has entered into a definitive agreement to a Telehealth Company for an undisclosed sum. The Sale and Purchase Agreement (“SPA”) was signed on March 17, 2023, and the transaction is closed on April 3, 2023.
Termination of Equity Agreement
On March 20, 2023, the Company’s Legal counsel provided notice to Marathon Global Inc, that Cosmos terminated the Equity agreement dated on March 19, 2018, pursuant to Section 3.2 and that termination is effective thirty days from the date of the letter.
| F-45 |
| Table of Contents |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer/Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were ineffective due to material weaknesses stated in Management’s Report on Internal Control over Financial Reporting set forth below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
| · | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions; |
|
|
|
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and |
|
|
|
| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, our management has concluded that our internal control over financial reporting was ineffective as of December 31, 2022, as the result of the below weaknesses.
AS 2201 and the SEC define the term “material weakness” as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.” We had the following material weaknesses at December 31, 2022 set forth below:
| · | The Company has a lack of proper segregation of duties. |
|
|
|
| · | The Company’s internal control structure lacks multiple levels of review and oversight and does not have appropriate IT General Controls (ITGCs) for the applications used in the Financial Reporting process, caused by lack of design of relevant controls and overall IT risk management. |
| 29 |
| Table of Contents |
Remediation of Deficiencies and Material Weaknesses
We are in the process of remediating all material weaknesses present in our internal controls.
- The Company has a lack of proper segregation of duties.
We are in the process of updating the organizational chart in order to reallocate roles among personnel and emphasize sharing the responsibilities of key business processes by distributing the discrete functions of these processes to multiple people and departments. Specifically, we have delegated the following processes to different personnel; authorization, custody, recordkeeping, and reconciliation. For example, a manager authorizing discount sales is not responsible for maintaining accounts receivable records or handling cash receipts. In addition, we have set access rights at the data and our software based on the job responsibilities and level of the personnel, therefore unauthorized users are not able to change any data on the system or process to bank transactions.
- The Company’s internal control structure lacks multiple levels of review and oversight and does not have appropriate IT General Controls (ITGCs) for the applications used in the Financial Reporting process, caused by lack of design of relevant controls and overall IT risk management.
We are in the process of developing multiple levels of review based on job responsibilities and level of personnel. For example, management reviews whether the bank reconciliations are being prepared on a timely basis by the preparer and whether there are discrepancies between the general ledger and the bank statements. Another example is the review of management accounting information by the CFO and his authorization for material transactions and adjustments. Also, the payroll is prepared by an outsourcing company, which is then reviewed by the Accountant and then the CFO approves the payroll expense and proceeds to payments. Furthermore, we are in the process of assessing a new financial reporting application that will be used by all the companies of the Group and would be able to support, process financially relevant information, provide financially relevant reporting and house financially relevant interfaces and application controls in order for us to more efficiently establish IT General Controls to a single and more reliable application.
Limitations on the Effectiveness of Internal Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting are or will be capable of preventing or detecting all errors or all fraud. Any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements, due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns may occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risk.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal year, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None
| 30 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our current directors and officers are listed below. Each of our directors will serve for one year or until their respective successors are elected and qualified. Our officers serve at the pleasure of the Board.
Name |
| Age |
| Position |
| ||||
Grigorios Siokas |
| 57 |
| CEO and Director |
|
|
|
|
|
Pavlos Ignatiades |
| 60 |
| Chief Communications Officer |
|
|
|
|
|
Georgios Terzis | 41 | CFO | ||
| ||||
Nikolaos Bardakis |
| 54 |
| COO |
|
|
|
|
|
Demetrios G. Demetriades |
| 56 |
| Secretary and Audit Committee Member |
|
|
|
|
|
Manfred Ziegler |
| 62 |
| Director and Advisory Board Member |
|
|
|
|
|
John J. Hoidas |
| 56 |
| Director and Audit Committee Member |
|
|
|
|
|
Anastasios Aslidis |
| 62 |
| Director and Audit Committee Chairman |
Grigorios Siokas joined us as CEO, CFO and Director on February 26, 2016. He has over 20 years’ experience in the pharmaceutical industry. Since 2014, he has served as the CEO and Operations Manager of SkyPharm SA a wholly owned subsidiary of the Company. SkyPharm SA is a pharmaceutical company located in Greece that mainly exports medicines from Greece to other European countries, such as Germany, England and Denmark. Prior to 2014, Mr. Siokas worked in a variety of sectors of the pharmaceutical industry mostly in the trading of medicines in Greece and other European countries. Additionally, since 2000 he has been a major shareholder in various pharmaceutical companies such as: Ippokratis Pharmaceuticals, (annual sales of over € 78 million); Thrakis Pharmaceuticals, (annual sales of over € 20 million); Thessalias Pharmaceuticals, (annual sales of over € 18 million); and ZED Pharma SA, (annual sales of over € 35 million). During the 1990s, Mr. Siokas founded and operated a marble wholesale import – export company in Germany. Within a period of two years he became the 4th biggest Greek marble importer in Germany. He also ran a Tour Operation with many different airlines, serving millions of customers. Grigorios Siokas has a Bachelor’s Degree in Geology from the Aristotle University of Thessaloniki, Greece. He received a Master’s in management and finance from the University of Stuttgart and the University of Tuebigen, Germany.
Pavlos Ignatiades was elected COO on November 11, 2020 and on February 1, 2023, he was succeeded by Nikolaos Bardakis. He then assumed the position of Chief Communications Officer (CCO). He was a senior portfolio manager and the CEO of INVESTMENT ANALYSIS S.A for over 10 years operating in the Athens Stock Exchange. He worked as an independent financial analyst for listed companies in Greece and abroad while he oversaw foreign funds (American and Asian) targeted at Greek innovative companies. From the beginning of Cosmos Health until February 2023, he was in charge of the daily activities of all subsidiaries and overviews all strategic tasks of the organization.
| 31 |
| Table of Contents |
Georgios Terzis was elected CFO on November 11, 2020. Prior thereto he was employed by the Company as International Finance Manager. He has served as an Executive Consultant to several multinational advisory firms where, he achieved commitments of more than >€50mil funding, financing and state incentives to a numerus investment in healthcare, logistics, RES and manufacturing industries. George holds an MBA from Alba Graduate Business school and a Bachelor’s Degree in Financial Management from University of Attica. He is certified as an independent valuator of companies and private investments by the European Commission.
Nikolaos Bardakis was appointed as COO on February 1, 2023, succeeding Mr Pavlos Ignatiades. Mr Bardakis was for more than 11 years, the National Sales Director for Servier Hellas, a multinational pharmaceutical company specializing in the areas of Cardiovascular, Central Nervous System and Metabolic diseases, where he led a cross functional client focused team comprised of Sales, Trade, Marketing and Business Development personnel, managing over 130 employees. He gained international exposure, participating in several boards and meetings focused on European level design and launch projects, pioneering in international operations. Mr. Bardakis received a BS in Finance from American College of Greece along with relevant studies in Natural Sciences.
Demetrios G. Demetriades was elected as Secretary and Director of the Company effective January 13, 2014. Since January 2003, Mr. Demetriades has been Director of Highlander Spring Trading Ltd, a trading company. From November 2000 to December 2002 he was Marketing Director of Eurolink Securities Ltd which was involved in trading in the Cyprus Stock Exchange. From January 1995 to November 2000 he was Supervising Officer of Laiki Factors Ltd a financing company. As a member of the board, Mr. Demetriades contributes the benefits of his trading, executive leadership and management experience. Mr. Demetriades will be compensated for his service from time-to-time as the Board of Directors will determine. He was also on the Audit Committee during the fiscal year 2021.
Dr. Manfred Ziegler was elected as Director on the AGM held on December 2, 2022. Dr. Ziegler has over 30 years of executive management, financial, and operational experience, as well as extensive expertise in mergers and acquisitions, with a particular focus on high-growth public and private companies. Notably, Dr. Manfred Ziegler served as Chief Executive Officer of CC Pharma, a leading German distributor of pharmaceutical and medical products into more than 24 countries. Dr. Ziegler was instrumental in the restructuring of CC Pharma and contributed to the acquisition of CC Pharma by Aphria (NYSE:APHA) in 2019. Before joining CC Pharma, Dr. Ziegler founded, built and managed several companies in the automotive, food and medical industries, both domestic and international. Currently, Dr. Manfred Ziegler is a managing director and founder of Conzima GmbH, a business management consultancy firm focused on restructuring and reorganizing business processes to improve operational efficiency. Dr. Ziegler received a degree in business administration from University of Mannheim.
John J. Hoidas was elected a Member of the Company’s Board of Directors on November 18, 2016. He was also elected to the Audit Committee during the fiscal year 2021. Mr. Hoidas is a wealth management professional with extensive experience in the capital markets and specifically in the financing of pharmaceutical companies. He is currently the senior vice president of Uhlmann Price Securities based in Chicago. Over the previous years he achieved to raise significant amounts of capital for late stage pre-IPO companies such as Organovo (ONVO), Invivo Therapeutics (NVIV) and Matinas BioPharma (MTNB) to name a few. He has served as a broker dealer to the following firms: Kingsbury Capital Investment Advisors, Kingsbury Capital LLC, Spencer Trask Ventures.
Dr Anastasios Aslidis was elected to serve on the Board of Directors and was appointed as a chair of the Audit Committee, on April 28, 2022, He has been the CFO, Treasurer and a member of the BoD of EuroDry. He is also member of the BoD, Treasurer and CFO of Euroseas since September, 2005. He also served as consultant to the BoD of shipping companies (public and private) advising on strategy development, asset selection and investment timing. Dr. Aslidis holds a Ph.D. in Ocean Systems Management from the MIT, M.S. in Operations Research and M.S. in Ocean Systems Management also from the MIT, and a Diploma in Naval Architecture and Marine Engineering from the National Technical University of Athens.
Cosmos Health Board Diversity Matrix
The table below provides certain information with respect to the composition of the Board. Each of the categories listed in the table has the meaning ascribed to it in NASDAQ Listing Rule 5605(f)(1). Cosmos Health intends to appoint one diverse director by December 31, 2023, in compliance with Rule 5605(f)(2)(D).
You may also refer to the following link of the Company’s website for its Diversity Matrix:
https://www.cosmosholdingsinc.com/images/pdf/Cosmos_Board_Diversity_Matrix.pdf
Board Diversity Matrix (as of March 1, 2023) | ||||
Total Number of Directors
| 5
| |||
| Female
| Male
| Non-Binary
| Did Not Disclose Gender
|
Part I: Gender Identity
| ||||
Directors
|
- |
5 |
- |
- |
Part II: Demographic Background
| ||||
African American or Black
|
- |
- |
- | -
|
Alaskan Native or Native American
|
- |
- |
- |
- |
Asian
|
- |
- |
- |
- |
Hispanic or Latinx
|
- |
- |
- |
- |
Native Hawaiian or Pacific Islander
|
- |
- |
- |
- |
White
|
- |
5 |
- |
- |
Two or More Races or Ethnicities
|
- |
- | -
|
- |
LGBTQ+
|
- | |||
Did Not Disclose Demographic Background
|
- | |||
| 32 |
| Table of Contents |
Term of Office
Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Legal Proceedings
No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:
| · | Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time, |
|
|
|
| · | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses), |
|
|
|
| · | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities, |
| · | Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
|
|
|
| · | Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity. |
|
|
|
| · | Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity. |
|
|
|
| · | Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity. |
| 33 |
| Table of Contents |
Audit Committee
We have a separately designated standing audit committee, which is appointed by our Board of Directors. On April 28, 2022, Dr Anastasios Aslidis was elected to serve on the Board of Directors and was appointed as a chair of the Audit Committee, replacing Mr Peter Goldstein, who submitted his resignation on the same date. Our three independent directors, Anastasios Aslidis, John Hoidas and Demetrios Demetriades serve on the Audit Committee. The primary function of the committee is to assist the Board of Directors in overseeing (1) the financial reporting and accounting processes of the Company, and (2) the financial statements audits of the Company. The Committee also prepares a written report to be included in the annual proxy statement of the Company pursuant to the applicable rules and regulations of the “SEC”. In furtherance of these purposes, the Committee shall maintain direct communication among the Company’s independent auditors and the Board of Directors. The independent auditors and any other registered public accounting firm engaged in preparing or issuing an audit report or performing other audit review or attest services for the Company shall report directly to the Committee and are ultimately accountable to the Committee and the Board of Directors.
In discharging its oversight role, the Committee is authorized to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company. The Committee shall have the sole authority to retain at the Company’s expense outside legal, accounting or other advisors to advise the Committee and to receive appropriate funding, as determined by the Committee, from the Company for the payment of the compensation of such advisors and for the payment of ordinary administrative expenses of the Committee that are necessary to carry out its duties. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Committee or to meet with any member of, or advisors to, the Committee. The Committee may also meet with the Company’s investment bankers or financial analysts who follow the Company.
The Committee shall meet no less frequently than four times per year, with additional meetings as circumstances warrant. The Committee shall also meet periodically with management, the internal auditors, if any, and the independent auditors in separate executive sessions. The Committee shall record the minutes of all such meetings and shall submit the minutes of its meetings to, or discuss the matters deliberated at each meeting with, the Board of Directors. The Company’s chief financial or accounting officer shall function as the management liaison officer to the Committee.
Director Independence
Our board of directors has determined that John Hoidas,Anastasios Aslidis, Manfred Ziegler and Demetrios G. Demetriades qualify as an “independent board member” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2021, no person failed to file, on a timely basis, any identified report required by Section 16(a) of the Exchange Act during fiscal year ended December 31, 2022.
| 34 |
| Table of Contents |
Code of Ethics
We have adopted a Code of Ethics for Financial Executives, which includes our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our Code of Ethics has previously been filed as an exhibit with the SEC.
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to both to our officers and to our directors for all services rendered in all capacities to us for our fiscal year ended December 31, 2022 and 2021.
SUMMARY COMPENSATION TABLE
Name |
| YE 12/31 |
| Salary ($) |
|
| Bonus ($) |
|
|
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| ||||||||||
Grigorios |
| 2022 |
|
| - |
|
|
| 600,000 |
|
|
| (8 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 600,000 |
|
Siokas (1) |
| 2021 |
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgios |
| 2022 |
|
| 22,121 |
|
|
| 50,000 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 36,000 |
|
|
| 108,121 |
|
Terzis (2) |
| 2021 |
|
| 42,843 |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 42,843 |
|
Pavlos |
| 2022 |
|
| - |
|
|
| 10,000 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,000 |
|
Ignatiades(3) |
| 2021 |
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Manfred |
| 2022 |
|
| - |
|
|
| 10,000 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,000 |
|
Ziegler (4) |
| 2021 |
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Anastasios |
| 2022 |
|
| - |
|
|
| 25,000 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 37,500 |
|
|
| 62,500 |
|
Aslidis(5) |
| 2021 |
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
John |
| 2022 |
|
| - |
|
|
| 10,000 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,000 |
|
Hoidas(6) |
| 2021 |
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Demetrios G. |
| 2022 |
|
| - |
|
|
| 10,000 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,000 |
|
Demetriades (7) |
| 2021 |
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
________________
(1) | Mr. Siokas became the Company’s Chief Executive Officer and Director of the Company in 2016. |
(2) | Mr. Terzis became the Company’s Chief Financial Officer on November 11, 2020. His compensation of $36,000 is in accordance with the consulting agreement he has signed with the Company at a $3,000 monthly rate. |
(3) | Mr. Ignatiades was elected COO on November 11, 2020 and on February 1st 2023, he was succeeded by Nikolaos Bardakis. He then assumed the position of Chief Communications Officer (CCO). |
(4) | Manfred Ziegler was elected as Director at the AGM held on December 2, 2022. |
(5) | Dr Anastasios Aslidis was elected to serve on the Board of Directors and was appointed as a chair of the Audit Committee on April 28, 2022. The $37,500 of compensation related to director fees for the period ended December 31, 2022. |
(6) | John J. Hoidas was appointed a Member of the Company’s Board of Directors on November 18, 2016. |
(7) | Demetrios G. Demetriades was elected as Secretary and Director of the Company effective January 13, 2014. |
(8) | On May 10, 2021, Mr. Siokas entered into a Debt Exchange Agreement in order to settle a lawsuit alleging profits made by him as a result of a Section 16(b) violation under the Securities Exchange Act of 1934. Under this agreement, Mr. Siokas forgave $600,000 of an existing loan payable. |
Narrative Disclosure to the Summary Compensation Table
There are no arrangements or plans in which we provide pension, retirement or similar benefits for executive officers.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of December 31, 2022.
| 35 |
| Table of Contents |
OUTSTANDING EQUITY AWARDS AT YEAR END
|
| Option Awards |
|
| Stock Awards |
| ||||||||||||||||||||||
|
| Number of Securities Underlying Unexercised Options |
|
| Option Exercise |
|
| Option Expiration |
|
| No. of Shares or Units of Stock that Have Not |
|
| Market Value of Shares or Units of Stock that Have Not |
|
| Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not |
| ||||||||||
Name |
| Exercisable |
|
| Un-exercisable |
|
| Price ($) |
|
| Date |
|
| Vested (#) |
|
| Vested ($) |
|
| Vested |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Grigorios Siokas |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgios Terzis |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pavlos Ignatiades |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demetrios G. Demetriades |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Director Compensation
During the fiscal year ended December 31, 2022, $37,500 were paid to Dr Anastasios Aslidis as director fees and $25,000 as bonus for the services rendered within 2022. Additionally, Dr Manfred Ziegler, Mr Demetrios G. Demetriades, and Mr John Hoidas all received cash bonuses in the amount of $10,000 each ($30,000 in total) for the services rendered during the year ended December 31, 2022.
In the future we may grant options to our directors to purchase shares of common stock as determined by our Board of Directors or a compensation committee that may be established.
Omnibus Equity Incentive Plan
On September 19, 2022 the Company held a Board of Directors meeting, whereas, the Board of Directors had elected to adopt an Omnibus Equity Incentive Plan (the “Plan”), that includes reserving 200,000 shares of common stock eligible for issuance under the Plan to be registered on a Form S-8 Registration Statement with the SEC. The Plan is designed to enable the flexibility to grant equity awards to the Company’s officers, employees, non-employee directors and consultants and to ensure that it can continue to grant equity awards to eligible recipients at levels determined to be appropriate by the Board and/or the Compensation Committee. The Plan was approved by the Company’s stockholders at the Annual Meeting of Stockholders held on December 2, 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information regarding the beneficial ownership of our common stock as of April 12, 2023, for each of the following persons, after giving effect to the transaction under the Exchange Agreement:
| · | all such directors and executive officers as a group; and |
| · | each person who is known by us to own beneficially five percent or more of our common stock prior to the change of control transaction. |
| 36 |
| Table of Contents |
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Unless otherwise indicated in the table, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the shareholder’s name. The percentage of class beneficially owned set forth below is based on 10,620,670 shares of common stock issued and outstanding on April 12, 2023. We calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act of 1934, as amended as of that date (the “Exchange Act”). Shares of our Common Stock issuable upon exercise of options or warrants or conversion of Notes that are exercisable or convertible within sixty (60) days of April 12, 2023 are included as beneficially owned by the holder, but not deemed outstanding for computing the percentage of any other Stockholder for Percentage of Common Stock Beneficially Owned Immediately. Beneficial ownership generally includes voting and dispositive power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole dispositive power with respect to all shares beneficially owned.
Name and Address of Beneficial Owners of Common Stock (1) |
| Amount and Nature of Beneficial Ownership |
|
| % of Common Stock |
| ||
|
|
|
|
|
|
| ||
Grigorios Siokas |
|
| 2,343,167 | (1) |
|
| 19.8 | % |
Pavlos Ignatiades |
|
| - |
|
|
| - |
|
Nikolaos Bardakis |
|
| - |
|
|
| - |
|
Georgios Terzis |
|
| - |
|
|
| - |
|
John J. Hoidas |
|
| - |
|
|
| - |
|
Dr. Anastasios Aslidis |
|
| - |
|
|
| - |
|
Dr. Manfred Ziegler |
|
| - |
|
|
| - |
|
Demetrios G. Demetriades |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
DIRECTORS AND OFFICERS |
|
| 2,343,167 |
|
|
| 19.8 | % |
|
|
|
|
|
|
|
|
|
As a group (8 persons) |
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
5% SHAREHOLDERS |
|
|
|
|
|
|
|
|
None |
|
|
|
|
|
|
|
|
(1) | Includes 1,130,774 issued shares; 212,383 shares issuable upon exercise of Exchange Warrants issued on October 2, 2022, pursuant to a Warrant Exchange Agreement dated as of October 3, 2022; 500,000 shares issuable upon exercise of Series A Common Warrants exercisable at $3.00 per share and 500,000 shares issuable upon exercise of Series B Common Warrants exercisable at $3.00 per share. The exercise of the Exchange Warrants, Series A Common Warrants and Series B Common Warrants are all subject to the Beneficial Ownership Limitation. |
Other than the shareholders listed above, we know of no other person who is the beneficial owner of more than five percent (5%) of our common stock.
| 37 |
| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Grigorios Siokas
On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum, matured on March 18, 2019 pursuant to the original agreement and was extended until December 31, 2021. The note is not in default and the maturity date has been extended again until December 31, 2023. As of December 31, 2021 the Company had an outstanding balance of €400,000 ($452,720) and accrued interest of €177,313 ($200,683). The Company repaid the outstanding principal balance in full during the year ended December 31, 2022. As of December 31, 2022 the Company had accrued interest of €192,891 ($206,355) outstanding related to this loan.
On May 10, 2021, the Company entered into a Debt Exchange Agreement (“May Debt Exchange”) related to a lawsuit from on or about July 25, 2019, whereby Mark Rubenstein, individually and as a shareholder of the Company, brought the action styled Rubenstein v. Siokas, et al., Case No. 1:19-cv-06976-KPF (S.D.N.Y.) against Grigorios Siokas for recovery of alleged profits earned under Section 16(b) of the Securities Exchange Act of 1934. Although recovery was sought only from Mr. Siokas, the Company was also named as a nominal defendant. Both the Company and Mr. Siokas vigorously defended the lawsuit. On or about September, 18, 2020, in an effort to avoid the uncertainty of litigation and further legal expense, Mr. Siokas agreed to settle the lawsuit by agreeing to reimburse the Company a total of $600,000, payable as a combination of: (1) Mr. Siokas reimbursing the Company for Plaintiff’s attorneys’ fees, in an amount subsequently determined by the Court to be $120,000 plus $4,137 of litigation costs to be paid in cash, and (2) Mr. Siokas relieving the Company of certain debt owed to him. Mr. Siokas and the Company strongly opposed Plaintiff’s motion for attorneys’ fees. Pursuant to the terms of the May Debt Exchange the Company forgave $600,000 of the existing loan payable and recorded the forgiveness to additional paid in capital.
| 38 |
| Table of Contents |
During the year ended December 31, 2021, the Company entered into various agreements (as defined in Note 6) with Mr. Siokas whereby the Company exchanged an aggregate total of $6,000,000 of debt into 40,000 shares of Common Stock at above market prices. During the year ended December 31, 2021, the Company borrowed additional proceeds of €1,803,000 ($2,040,635), €230,000 ($275,306) and $4,061,215 and repaid €118,000 ($133,552) of these loans. During the year ending December 31, 2021, the Company converted $2,250,000 of the July 20 Note at a conversion price of $150.00 and issued 15,000 shares of common stock. As of December 31, 2021, the Company had an outstanding balance under these notes and loans of $1,293,472. During the year ended December 31, 2022, the Company borrowed additional proceeds of €656,750 ($702,591), and $2,933,165 and repaid €1,688,800 ($1,806,678) and $3,045,000 of these loans.
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2022 and 2021, the Company recorded a gain of $64,729 and a loss of $20,623, respectively.
Grigorios Siokas is the Company’s CEO and principal shareholder and is hence considered a related party to the Company.
Doc Pharma
As of December 31, 2022, the Company has a prepaid balance of $3,320,345 and an accounts payable balance of $201,991 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $2,070,570. As of December 31, 2021, the Company has a prepaid balance of $3,263,241 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company had a receivable balance of $2,901,300 and an accounts payable balance of $565,756.
During the years ended December 31, 2022 and 2021, the Company purchased a total of $1,755,103 and $3,084,805 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2022 and 2021 the Company had $1,029,871 and $978,321 revenue from Doc Pharma S.A., respectively.
On October 10, 2020, the Company entered into a contract manufacturer outsourcing “CMO” agreement with Doc Pharma whereby Doc Pharma is responsible for the development and manufacturing of pharmaceutical products and nutritional supplements according to the Company’s specifications based on strict pharmaceutical standards and good manufacturing practice (“GMP”) protocols as the National Organization for Medicines requires. The Company has the exclusive ownership rights for trading and distribution of its own branded nutritional supplements named “Sky Premium Life®”. The duration of the agreement is for 5 years however either party may terminate the agreement at any time giving six-months advance notice. Doc Pharma is exclusively responsible for supplying the raw materials and packaging required to manufacture the final product. However, they are not responsible for potential delays that may arise, concerning their import. Doc Pharma is obliged to store the raw and packaging materials. The delivery of raw and packaging materials should be purchased at least 30 and 25 days, respectively, before the delivery date of the final product. The Manufacturer solely delivers the finished product to the Company. There is a minimum order quantity “MoQ” of 1,000 pieces per product code. Both parties have agreed that the Company will deposit 60% of the total cost upon agreement and assignment and 40% of the total cost including VAT charge upon the delivery date. The prices are indicative and are subject to amendments if the cost of the raw material or the production cost change.
For the years ended December 31, 2022 and 2021, the Company has purchased €1,653,911 ($1,742,282) and €1,699,507 ($2,010,517), respectively, in inventory related to this agreement.
| 39 |
| Table of Contents |
On May 17, 2021, Doc Pharma and the Company entered into a Research and Development “R&D” agreement whereby Doc Pharma will be responsible for the research, development, design, registration, copy rights and licenses of 250 nutritional supplements for the final products called Sky Premium Life®. These products will be sold in Greece and abroad. The total cost of this project will be €1,425,000 plus VAT and will be done over three phases as follows: Design & Development (€725,000); Control and Product Manufacturing (€250,000) and Clinical Study and Research (€450,000). In the year ended December 31, 2021, SkyPharm bought 67 licenses at value of €261,300 ($289,860) from Doc Pharma which was the 18.33% of the total cost. During the year ended December 31, 2022, SkyPharm bought another 14 licenses at a value of €293,200 ($313,665) from Doc Pharma which was the 20.57% of the total cost. SkyPharm has bought in total as of December 31, 2022, 81 licenses at value of €554,500 ($593,204) which is 38.91% of the total cost. The agreement will be terminated on December 31, 2025.
The balance of SkyPharm SA due from Doc Pharma SA as of December 31, 2022, had increased to €7,103,706, which was mainly attributable to the prepayments SkyPharm SA made in accordance with the CMO agreement and the extensive orders and sales of the SPL products the Company expects to achieve within 2023, mainly through its Amazon channels in UK, Singapore, Canada, etc. However, due to the fact that significant portion of this balance had a maturity over 12 months, the Company decided to secure a portion of it through a loan agreement and separate it from the prepaid balance. Therefore, on January 1, 2023, SkyPharm SA (“the Lender”) signed a loan agreement with Doc Pharma SA (“the Borrower”) for €4,000,000 relating to the prepaid balance. The duration of the loan will be for a 10-year period up to December 1, 2032 (“the Maturity date”). The loan will bear a fixed interest rate of 5.5% payable on monthly basis and will be repayable in 120 equal instalments of €33,333.33. The loan may be prepaid anytime during its in full or partially based on the Company’s product requirements and other factors, without Doc Pharma incurring any prepayment penalty. As of December 31, 2022, the loan had a current portion of €400,000 ($377,038) and a non-current portion of €3,600,000 ($3,851,280), which was reclassified to Loans receivable – related party as of December 31, 2022.
Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma S.A. in the past.
Panagiotis Kozaris
From time-to-time purchases back shares that Panagiotis Kozaris owns and records them as treasury shares. The Company pays Panagiotis Kozaris in advance for the shares owned and obtains the shares upon execution of a cumulative stock-purchase agreement (“SPA”). During 2021 the Company prepaid a total of $376,901 to Panagiotis Kozaris and executed a cumulative SPA on December 29, 2021, upon which shares of treasury stock were obtained by the Company, reducing Panagiotis Kozaris’ prepaid expense balance to $0 as of December 31, 2021. During the year ended December 31, 2022 the Company paid Panagiotis Kozaris an additional sum of $143,056 for shares owned, however, no SPA for these funds has been executed as of December 31, 2022. The amount of $143,056 is included in Prepaid expenses and other current assets - related party, on the accompanying consolidated balance sheet as of December 31, 2022. The Company intends to execute a cumulative SPA for these amounts during Q2 2023.
Panagiotis Kozaris is considered a related party due to the fact that he is a former General operational manager and current employee of Cosmofarm SA.
Maria Kozari
During 2021, the Company, through its subsidiary, Cosmofarm SA, commenced a partnership with a pharmacy called “Pharmacy & More”, owned by Maria Kozari. The transactions with the respective pharmacy were in Cosmofarm’s normal course of business, however, a more flexible credit policy was allowed as the pharmacy was new and needed to be established in the market. During the years ended December 31, 2022 and 2021 the Company’s net sales to Pharmacy & More amounted to $463,467 and $358,524 respectively. As of December 31, 2022 and 2021 the Company’s outstanding receivable balance due from the pharmacy amounted to $760,025 (€710,436) and $366,270 (€366,270), respectively, and are included in “Accounts receivable - related party”, on the accompanying consolidated balance sheets. The Company has recorded a cumulative bad debt allowance of $59,957 to the outstanding balance due from Pharmacy & More as of December 31, 2022, with the reserve for the period ended December 31, 2022, amounting to $48,230.
| 40 |
| Table of Contents |
The Company plans to acquire Pharmacy & More within fiscal year 2023, , however the acquisition is conditional upon waiver of certain local legal restrictions. Upon acquisition, the Company intends to offset the outstanding receivable balance with the corresponding purchase price.
Maria Kozari is considered a related party to the Company due to the fact that she is the daughter of Panagiotis Kozaris, a former Operational General Manager and current employee of Cosmofarm SA.
Item 14. Principal Accountant Fees and Services
On January 18, 2019, the Company’s Board of Directors approved the engagement of Armanino LLP (“Armanino”) as the Company’s new Independent Certified Public Accountants, and the Company entered into an engagement agreement with Armanino on January 18, 2019. Armanino performed the audit of the Company’s consolidated financial statements for the fiscal years ended December 31, 2022 and December 31, 2021 and issued the audit report in this Annual Report.
The following table presents: (1) estimated fees for professional audit services rendered by Armanino for the audit of our annual financial statements and for other services for the year ended December 31, 2021; and (2) fees for professional audit services rendered by Armanino for the audit of our annual financial statements and for other services for the years ended December 31, 2022 and 2021.
Financial Statements for the Year Ended |
| Audit Services |
|
| Audit Related Fees |
|
| Tax Fees |
|
| Other Fees |
| ||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
ARMANINO LLP |
| $ | 285,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARMANINO LLP |
| $ | 189,000 |
|
|
| - |
|
|
| - |
|
|
| - |
|
As defined by the SEC, (i) “audit fees” are fees for professional services rendered by our principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-K, or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; (ii) “audit-related fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning; and (iv) “all other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,” “audit-related fees,” and “tax fees.”
Audit Fees for the fiscal years ended December 31, 2022 and 2021 were for professional services rendered for the audits and quarterly reviews of the financial statements of the Company, consents, and other assistance required to complete the year-end audit of the financial statements.
As the Company has a formal audit committee, the services described above were approved by the audit committee under the de minimus exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X. Further, as the Company has a formal audit committee, the Company has audit committee pre-approval policies and procedures.
| 41 |
| Table of Contents |
PART IV
Item 15. Exhibits and Financial Statement Schedules
| 42 |
| Table of Contents |
| Common Stock Purchase Warrant dated September 4, 2017 issued to Roth Capital Partners LLC (15) | |
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| Pledge Agreement, by and between Grigorios Siokas and Synthesis Peer-to Peer Income Fund (4) | |
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| 43 |
| Table of Contents |
| 44 |
| Table of Contents |
| 45 |
| Table of Contents |
| 46 |
| Table of Contents |
| 47 |
| Table of Contents |
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101.INS |
| Inline XBRL Instance Document* |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document* |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document* |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document* |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document* |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document* |
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101 |
| Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.* |
| 48 |
| Table of Contents |
* | Filed with this Report |
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(1) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 12, 2021. |
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(2) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 1, 2022. |
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(3) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 9, 2015. |
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(4) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on August 16, 2016. |
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(5) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on September 16, 2016. |
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(6) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on October 5, 2016. |
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(7) | Incorporated by reference to the Current Report on Form 8-K/A filed by the Registrant on March 28, 2017. |
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(8) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on April 14, 2017. |
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(9) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on May 18, 2017. |
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(10) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 16, 2017. |
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(11) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on December 27, 2017. |
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(12) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on February 21, 2018. |
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(13) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 19, 2018. |
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(14) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 3, 2013. |
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(15) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 5, 2018. |
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(16) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 31, 2018. |
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(17) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 26, 2018. |
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(18) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 19, 2018. |
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(19) | Incorporated by reference to the filing of the Annual Report on Form 10-K filed by the Registrant on April 17, 2018. |
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(20) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 27, 2018. |
| 49 |
| Table of Contents |
(21) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 19, 2018. |
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(22) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 13, 2018. |
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(23) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 21, 2018. |
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(24) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 6, 2019. |
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(25) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 19, 2019. |
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(26) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 4, 2019. |
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(27) | Incorporated by reference to Registration Statement on Form S-1/A (No. 333-222061) filed by the Registrant on January 31, 2018. |
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(28) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 16, 2019. |
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(29) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 28, 2019. |
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(30) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 25, 2019. |
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(31) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 23, 2020. |
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(32) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 15, 2020. |
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(33) | Incorporated by reference to the filing of the Current Report on Form 10-Q filed by the Registrant on August 13, 2020. |
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(34) | Incorporated by reference to the filing of the Report on Form 8-K filed by the Registrant on September 24, 2020. |
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(35) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 21, 2020. |
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(36) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on November 13, 2020. |
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(37) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on November 16, 2020. |
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(38) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on November 17, 2020. |
| 50 |
| Table of Contents |
(39) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 22, 2020. | |
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(40) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 11, 2021. | |
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(41) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 2, 2021. | |
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(42) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 8, 2021. | |
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(43) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 17, 2021. | |
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(44) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 21, 2021. | |
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(45) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 25, 2021. | |
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(46) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 14, 2021. | |
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(47) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 27, 2021. | |
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(48) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on August 10, 2021. | |
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(49) | Incorporated by reference to the filing of the Current Report on Form 10-Q filed by the Registrant on August 16, 2021. | |
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(50) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 21, 2021. | |
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(51) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 1, 2022. | |
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(52) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on October 4, 2018 | |
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(53) | Incorporated by reference to the filing of the Annual Report on Form 10-K filed by the Registrant on April 15, 2022. | |
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(54) | Incorporated by reference to the filing of the Registration Statement on Form S-1 filed by the Registrant on May 24, 2022. | |
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(55) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on July 29, 2022. | |
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(56) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on July 25, 2022. |
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(57) | Incorporated by reference to the filing of the Company’s Registration Statement on Form S-1 filed by the Registrant on September 19, 2022. |
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(58) | Incorporated by reference to the filing of the Company’s Current Report on Form S-3 filed by the Registrant on September 21, 2022. |
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(59) | Incorporated by reference to the Company’s Schedule 14A filed by the Registrant on September 23, 2022. |
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(60) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on October 3, 2022. |
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(61) | Incorporated by reference to the filing of the Company’s Registration Statement on Form S-1/A filed by the Registrant on October 11, 2022. |
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(62) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on October 18, 2022. |
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(63) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on December 19, 2022. |
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(64) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on December 20, 2022. |
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(65) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on January 17, 2023. |
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(66) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on March 6, 2023. |
Item 16. Form 10-K Summary
None.
| 52 |
| Table of Contents |
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Cosmos Health Inc. | ||
| |||
Date: April 12, 2023 | By: | /s/ Grigorios Siokas | |
| Grigorios Siokas | ||
In accordance with the Exchange Act, this report has been duly signed by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signatures |
| Title |
| Date |
| ||||
| /s/ Grigorios Siokas |
| Chief Executive Officer and Director |
| April 12, 2023 |
Grigorios Siokas |
| (Principal Executive Officer) | ||
|
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|
|
| /s/ Georgios Terzia |
| Chief Financial Officer |
| April 12, 2023 |
Georgios Terzis |
| (Principal Financial Officer, and Principal Accounting Officer) |
|
|
| ||||
/s/ Demetrios G. Demetriades |
| Secretary and Director |
| April 12, 2023 |
Demetrios G. Demetriades | ||||
| ||||
/s/ John J. Hoidas |
| Director |
| April 12, 2023 |
John J. Hoidas | ||||
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/s/ Anastasios Aslidis |
| Director |
| April 12, 2023 |
Dr. Anastasios Aslidis |
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|
|
|
|
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|
/s/ Manfred Ziegler |
| Director |
| April 12, 2023 |
Dr. Manfred Ziegler |
|
|
|
|
| 53 |
EXHIBIT 10.82
PURCHASE AGREEMENT
(the “Agreement”)
January 6, 2023
4423607 CANADA INC
Owner of PLACE CHURCHILL INC
3705 Place Churchill Inc Brossard (Québec) J4Y0E4 Canada
An agreement has been concluded as follows.
Cosmos Health Inc. (the "Purchaser") based on the warranties and representations herein contained and subject to the terms and conditions hereinafter set forth hereby offers to purchase from 4423607 Canada Inc (the "Vendor") the land and buildings described as follows:
“Lot number 1 853 553 of the Cadastre of Quebec, registration division of Montreal with building(s) and said lot having the approximate area of 450square meters, thereon erected bearing civic numbers 1570 rue Richardson, Montreal, Quebec.”
(the"Property");
1. PURCHASE PRICE
The purchase price shall be in the sum of Three Million Nine Hundred and Fifty Thousand Dollars ($3,950,000.00) payable as follows:
(a) the sum of One Million and Two Hundred Thousand Dollars ($1,200,000.00) by way of an initial deposit, to be paid into the account of seller s (RBC Account 4001939 ), in trust, not later than thirty (60) business days after the date of acceptance of this Offer and to be applied on the purchase price on the Closing Date provided in article 3 (the "Deposit");
(b) the sum of Three Million Nine Hundred and Fifty Thousand Dollars ($3,950,000.00) subject to adjustments pursuant to article 8 (b) and the sums provided in article 1 (a) above, to be paid on the Closing Date, provided that such sum shall be retained, in trust, until the deed of sale has been registered and entered in the Index of Immovables without any adverse entry and provided that the said sum shall be invested on a daily basis with such interest accruing from and after the Closing Date to be for the benefit of the Vendor.
2. DEPOSIT
The Deposit monies shall be paid by certified cheque or bank draft or bank transfer as aforesaid, in trust to 4423607 Canada Inc.
3. CLOSING DATE AND HOLD PERIOD
Subject to the provisions contained in article 6 (a) hereof, the purchase and sale will be completed at the latest ninety (195) days after the expiry of the delay mentioned in article 5.2 or sooner at the Purchaser's election (the “Closing” or “Closing Date”).
4. DELIVERY OF DOCUMENTS
Within Thirty (30) business days of the date of acceptance of this Offer, the Vendor will deliver to the Purchaser the following:
(a) copies of the leases, offers to lease and other leasing documents (collectively the “Leases”);
(b) plans, engineering reports in the possession or control of the Vendor;
(c) Environment reports in the possession or control of the Vendor;
(d) building condition reports in the possession and control of the Vendor;
| 2 |
(e) service contracts;
(f) list of equipment, fixtures and other moveables owned by the Vendor and used in the operation of the Property;
(g) up-to-date certificate of location prepared by a duly qualified Quebec land surveyor;
(h) revenue and expenses for the Property for the past two (2) years;
(i) real estate tax bills for the past three (3) years; and
(j) such other documentation or information that the Purchaser may reasonably require that is in the possession or control of the Vendor.
(collectively the “Documents”)
5. DUE DILIGENCE
5.1 Within ninety (195) days of the delivery of the Documents, the Purchaser shall conduct its Due Diligence by arranging for inspections (interior and exterior) by the Purchaser's representatives and agents, at times reasonably convenient to the Purchaser and, further, the Vendor shall make available to the Purchaser the records of the Property and the Purchaser, its agents and representatives shall be entitled to make and retain copies of such records and further Purchaser shall arrange for an examination of title to the Property by its legal representative. During such Due Diligence, the Purchaser, its agents and representatives shall be permitted to enter the Property with equipment, if necessary, for the purpose of inspecting or surveying it or making tests of any sort whatsoever. Vendor shall install and maintain sufficient lighting and electrical power during Due Diligence (interior and exterior).
5.2 Should the Purchaser be satisfied with its Due Diligence, it shall notify Vendor in writing to such effect and the sale of the Property shall proceed as herein contemplated. Failure to so notify the Vendor within ninety (195) days after delivery of the Documents shall be deemed to mean that Purchaser is not sufficiently satisfied with its Due Diligence and consequently the Offer shall be null and void and the Deposit shall be forfeited to the Vendor. The exercise of the Purchaser's rights hereunder shall be entirely at its unfettered discretion.
| 3 |
6. REPRESENTATION AND WARRANTIES
6.1 The Vendor represents and warrants to the Purchaser that:
(a) there shall be conveyed to the Purchaser at and by the Closing Date a good and marketable title in and to the Property and same shall be free and clear of all prior claims, hypothecs, charges, and servitudes (except those servitudes granted for public utility purposes which in the opinion of the Purchaser's legal counsel, do not adversely affect the Property or any present or future use thereof);
(b) the Property is used and will at the Closing Date be used in compliance with all applicable laws, by-laws, regulations, requirements, and restrictions of any lawful authority having jurisdiction, all of which shall permit the use and occupation at the time of the Property in the manner in which the same is presently being used and there are not, and there shall not be at the Closing Date, any contravention or notice of contravention of any statute, by-law, ordinance, rule or regulation of any authority having jurisdiction arising from the current use of the Property;
(c) there are no outstanding work orders, or fire upgrading requirements, health orders or other notices of building deficiencies in effect with respect to the Property from any governmental authority pursuant to which the Vendor, or its predecessors on title are required to cure, repair or rectify any breach or non-compliance of the Property or any use thereof in relation to any applicable statute, by-law, regulation or order.
(d) the structure of the Property is in good repair and the HVAC, electrical and mechanical systems and all other base building systems are fully operational.
(e) all taxes, rates, levies and assessment of every nature and kind due, including without limitation, school, municipal, whether special or general taxes, rates, levies and assessments, including all and any interest thereof, with respect to the Property have been paid in full without subrogation.
(f) the Vendor is not a party to any litigation or other proceedings which affects or might, to the best of the Vendor's knowledge, be reasonably anticipated to affect its title or its ability to sell the Property and, without limitation, the Vendor has not received notice of any expropriation proceedings and no expropriation has been commenced nor, to the best of the Vendor's knowledge, threatened with respect to all or any portion of the Property;
| 4 |
(g) the Vendor has the power, authority and capacity and will at the Closing Date have the power, authority and capacity to sell the Property to the Purchaser;
(h) the Vendor has not received any form of notice whatsoever from any governmental authority, nor notice of any claim by any contractor or subcontractor;
(i) the Vendor is, and will be on the Closing date, a resident of Canada as defined in the Income Tax Act (Canada) and the Taxation Act (Quebec);
(j) the Property does not contain any asbestos or urea formaldehyde;
(k) there are no toxic chemicals/wastes being stored on the Property nor have the soils been in the past or are presently contaminated with toxic wastes or chemicals and the Vendor has complied with all laws and regulations of an environmental nature as regards to the Property;
(l) the buildings, improvements, fixtures, appurtenances, attachments and the Vendor's property referred to in article 10 hereof will be maintained in at least as good operating repair and condition as they are at present until Closing Date;
(m) the Vendor shall pay all real estate commissions and finder's fees which may be payable as a result of the transaction contemplated herein and will indemnify and hold the Purchaser harmless against any claim of any broker, agent or other person or entity in connection with this Offer and the transaction contemplated herein;
(n) the Property is not affected by the Act to Preserve Agricultural Land;
(o) the Property is not a classified or recognized cultural property, and is situated neither in a historic or natural district, a classified historic site nor in a protected area in accordance with the Cultural Property Act;
(p) the Leases are in good standing, in full force and effect, and are the only existing agreements or other rights of occupancy existing in respect of the Property (except for New Leases as hereinafter defined) and have not been modified and represent the entire agreements between the landlord and the tenants, nor have the rents payable thereunder been assigned in any way nor to any party whatsoever and there are not any existing material disputes or defaults under the Leases or New Leases as hereinafter defined;
| 5 |
(q) that as of the date of the acceptance hereof, and on the Closing Date, no rental commission shall be payable in respect of any Lease and the Vendor will indemnify and hold the Purchaser harmless from any claim for any such leasing commission;
(r) the Vendor's interest in all prepaid rents, rent deposits, and other amounts held for the account of tenants of the Property shall be transferred to the Purchaser at the Closing Date;
which warranties are to be true and shall survive the Closing Date.
6.2 Once this Offer is accepted by the Vendor, the Vendor shall inform the Purchaser of any New Lease, offer to lease or other transaction with respect to the Property (“New Lease(s)”). Any such New Lease shall require the written consent of the Purchaser.
7. CONDITIONS PRECEDENT
The foregoing conditions and the representations and warranties provided in article 6 are for the sole and exclusive benefit of the Purchaser and may be waived in whole or in part by the Purchaser. If any such condition, representation or warranty is not fulfilled or waived within the stipulated time limit, the agreement resulting from acceptance of this Offer will be null and void and the Deposit with all accrued interest thereon will be returned to the Purchaser forthwith without deduction.
8. CLOSING
8.1 The following will be the terms of the completion of the purchase and sale of the Property:
(a) the purchase and sale will be completed at the office of the Notary on the Closing Date;
(b) adjustment of rents, taxes, security deposits, prepaid rents and utilities as well as any other items subject to adjustment will be made as of the Closing Date;
(c) the Vendor will deliver to the Purchaser good and marketable title of the Property free and clear of all prior claims, hypothecs and charges of any nature or kind whatsoever except for servitudes granted for public utility purposes which, in the opinion of the Purchaser's legal counsel, do not adversely affect the Property or any present or future use thereof;
| 6 |
(d) the deed of sale shall be prepared by the Notary, at the Purchaser's expense, including the costs of registration and one copy for the Vendor;
(e) the Purchaser shall have possession and ownership of the Property on the Closing Date;
(f) the deed of sale shall contain an assignment by the Vendor to the Purchaser of all assignable existing guarantees, warranties and indemnities respecting the Property and all items mentioned in article 10 as well as an assignment of all Leases and New Leases and such service contracts that the Purchaser has indicated to the Vendor that it is prepared to assume.
8.2 G.S.T./Q.S.T.
At Closing, the Purchaser will be duly registered under subdivision of Division V of Part IX of the Excise Tax Act (Canada) as well as under the corresponding provisions of the Retail Sales Tax Act (Québec) and the Vendor will therefore be relieved of its obligations to collect the Goods and Services Tax and Québec Sales Tax from the Purchaser.
8.3 Transfer Taxes
Purchaser shall be responsible for payment of any taxes due pursuant to An Act Respecting Duties on Transfers of Immoveables.
8.4 Moveable Hypothecs
Vendor shall assign to Purchaser all such moveable hypothecs it may have on the assets of any commercial tenants.
9. RISK
The Property shall be at the Vendor's risk and shall be insured by it until and including the Closing Date and in the event of material loss or damage to the Property occurring before such date by whatever cause, the Purchaser may elect to cancel the agreement resulting from the acceptance of this Offer, in which case the Deposit and all accrued interest thereon shall be returned to the Purchaser, or proceed to execute the deed of sale, in which case the Vendor shall assign to the Purchaser the proceeds of the insurance claim, provided such assignment is not contrary to the provisions of any existing agreements.
| 7 |
10. FIXTURES
The purchase price includes the Vendor's interest in any building, improvements, fixtures, appurtenances, and attachments thereto including electric, plumbing and heating fixtures and all elevators and equipment as at the date hereof and all of the Vendor's property situated on the Property or in the building forming part thereof and pertaining to the operation or upkeep of such building.
12. FURTHER ASSURANCES
Each of the parties shall execute and deliver all such further documents and do such other things as the other party may reasonably request to give full effect to this agreement.
13. NOTICE
Any notices required pursuant to the terms hereof must be in writing and sent by mail, electronic mail or telecopier (if not served by bailiff or delivered by hand), to the following addresses:
to the Vendor:
4423607 CANADA INC
3705 Place Java, Local 230
Brossard (Québec) J4Y0E4
Telephone: 514-998-8111
E-Mail: pietro@northerncap.com
to the Purchaser:
COSMOS HEALTH INC
141 W. Jackson Blvd, Suite 4236
Chicago, IL 60604
Grigorious Siokas, Chief Executive Officer
E-Mail: greg.ceo@cosmoshealthinc.com
| 8 |
and shall be deemed to have been received on the third (10th) business day following the date same was sent by registered mail or the date at which it shall have been served by bailiff or delivered by hand, or on the next business day if sent by electronic mail or telecopier.
14. LANGUAGE
The parties hereto have requested that the present Offer be drafted in the English Language only. Les parties à ce contrat ont requis que ledit contrat soit rédigé en la langue anglaise seulement.
15. GOVERNING LAWS AND JURISDICTION
The present Offer and its acceptance thereof shall be governed by the laws of the Province of Quebec. The Courts of the Province of Quebec for the District of Montreal shall have exclusive jurisdiction with respect to legal proceedings instituted hereunder to the exclusion of any other forum.
16. ACCEPTANCE
This Offer shall be open for acceptance up until March 30th, 2023 at 5:00 p.m. and upon acceptance by the Vendor signing a copy of this Offer and returning the same within the aforesaid delay duly signed to the Purchaser, there shall be a binding agreement of purchase and sale of the terms and conditions herein set forth.
| SIGNED on the 28th day of March 2023 | |||
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| CANADA INC. |
| |
| Per: | /s/ Pietros Savvides | ||
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| ||
| SIGNED on the 28th day of March 2023 | |||
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| COSMOS HEALTH |
| |
|
| Per: | /s/ Grigorios Siokas |
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| 9 |
SCHEDULE “A”
C E R T I F I C A T E
| Date: |
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| (Purchaser) |
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| Attention: |
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Re: Lease (the “Lease”) between as landlord (the “Landlord”) and the undersigned as tenant (the “Tenant”), for premises (the “Premises”) located in the building bearing civic number , Province of (the ”Building”).
Dear Sirs:
In connection with a possible sale of the Building in which the Premises leased by the undersigned are located, we confirm the following:
| 1. | 1.The parties to the Lease are as Landlord and the undersigned as Tenant. The Lease is dated , . There are no side letters or agreements related to the Lease or the Premises, and the Lease referred to above is unamended and reflects the entire agreement between the Landlord and the undersigned in respect of the Premises and our occupancy thereof. We do not have any rights or first refusal, options (including in respect of the purchase of the Building or the property in which it is situated) or other rights in respect of the Premises, Building or such property except as set out in the Lease. |
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| 2. | We are presently in occupancy of the Premises and are occupying the entirety thereof for the conduct of our business. We have not assigned the Lease or any interest in the Lease and we have not sublet the whole or any part of the Premises. We have not received notice to the assignment by the Landlord of the Lease or any rents payable thereunder. |
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| 3. | The term of our Lease began on and ends on . We have no options to renew or extend the term of our Lease except as set forth below: |
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| 4. | We have paid rent under the Lease in respect of all periods to and including the period ended . We have not prepaid any rent under the Lease nor paid any security deposit except: |
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| 5. | The Premises have been completed in accordance with the Landlord's obligations, and the Landlord has paid to the undersigned all allowances and other inducements which we are entitled to under the Lease. |
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| 6. | To our knowledge, Landlord is not in default of any of its obligations under the Lease and we have no knowledge of any event or circumstance which has occurred which may result in Landlord being in default under the Lease. |
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| 7. | We are not claiming any right of deduction or set off against the amounts payable by the undersigned under our Lease. |
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| 8. | The area of the Premises is square feet/square meters. |
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| 9. | We are paying an amount of $ per year as rent under the Lease, which amount is payable in twelve (12) equal monthly payments of $ . (We are also paying an amount equal to $ as percentage rent under the Lease.) |
We understand that this Certificate shall be relied upon by you or such person as you shall designate as the purchaser in connection with the purchase of the property of which the Building and Premises are a part and shall also be relied upon by the lenders as well as their successors and assigns which shall provide financing in connection with such purchase and confirm that you, such person designated by you and such lenders shall be entitled to use and rely upon this Certificate for such purposes.
| Yours truly, | ||
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| (Tenant) | ||
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| Per: |
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| 10 |
EXHIBIT 21
SUBSIDIARIES
| Name |
| Jurisdiction |
| Ownership |
| |
|
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|
|
|
|
| |
| Cosmofarm Ltd. |
| Greece |
|
| 100 | % |
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|
| SkyPharm, S.A. |
| Greece |
|
| 100 | % |
|
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|
|
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|
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|
| Decahedron Ltd. |
| United Kingdom |
|
| 100 | % |
EXHIBIT 31.1
CERTIFICATION
I, Grigorios Siokas, certify that:
| 1. | I have reviewed this report on Form 10-K of Cosmos Health Inc.; | |
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| |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
|
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting |
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| Cosmos Health Inc. |
| |
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| Date: April 12, 2023 | By: | /s/ Grigorios Siokas |
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| Grigorios Siokas |
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| Chief Executive Officer |
|
EXHIBIT 31.2
CERTIFICATION
I, Georgios Terzis, certify that:
| 1. | I have reviewed this report on Form 10-K of Cosmos Health Inc.; | |
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| |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| |
|
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting |
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| Cosmos Health Inc. |
| |
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| Date: April 12, 2023 | By: | /s/ Georgios Terzis |
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| Georgios Terzis |
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| Chief Financial Officer |
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned hereby certifies that the Annual Report on Form 10-K for the year ended December 31, 2022 of Cosmos Health Inc. (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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| Cosmos Health Inc. |
| |
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| Date: April 12, 2023 | By: | /s/ Grigorios Siokas |
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| Grigorios Siokas |
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| Principal Executive Officer |
|
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Cosmos Health Inc. and will be retained by Cosmos Health Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned hereby certifies that the Annual Report on Form 10-K for the year ended December 31, 2022 of Cosmos Health Inc. (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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| Cosmos Health Inc. |
| |
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| Date: April 12, 2023 | By: | /s/ Georgios Terzis |
|
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| Georgios Terzis |
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| Principal Financial Officer and Principal Accounting Officer |
|
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Cosmos Health Inc. and will be retained by Cosmos Health Inc. and furnished to the Securities and Exchange Commission or its staff upon request.